Staircasing – what does it mean?
Professional terminology can be a little off-putting and this is particularly so in the housing market and world of the mortgage adviser.
We know how difficult it can be to be sure you have all the facts and fully understand exactly what you are entering into with no nasty surprises looming around the corner – which is why we at Dwello Mortgages always strive to ensure Shropshire homeowners have all the information they need in clear concise language which enables them to come to the right decision to meet their needs
Choosing the right option
Borrowers have different requirements and there are several ways of going about buying your home. One is staircasing – a term you may be unfamiliar with but one which may provide the most suitable option for you. So what is staircasing?
- Staircasing allows you to buy shares in your home after you become a shared owner
- It means buying part of your home while paying rent to your landlord on the share of the property you are not buying
- The more shares you buy over time, the less rent you pay until you own a 100% share in the property
- There are two ways to achieve this: Gradual Staircasing – buying shares of 1% each year, or Standard Staircasing – buying shares of 5% or more
The price of a 1% share in Gradual Staircasing is based on the original price of the property and will increase or decrease in line with the House Price Index. Standard Staircasing means you can usually buy additional shares at any time if you are increasing your stake by 5% or more. The cost of the new share will depend on how much your home is worth when you want to buy that share.
Nathan Blissett, our founder and principal mortgage adviser, explains the benefits:
He said: “In light of the UK’s current economic landscape there are undervalued avenues on the mortgage market that a large portion of interested buyers in Shropshire are not aware exist.
“With shared ownership coming to the forefront of lenders across the nation in the early 2000’s, it seems surprising that the uptake in the product seems fairly low in current yearly market share of completed mortgages – approximately only 18,000 completions each year.
“Shared ownership was introduced in the form that we know it today in the 1980s via the Housing Act 1980, which incorporated the right to staircase to help people who were in housing need and could not afford to buy a home outright.
“We can still see today the impact this product has on the market with 76% of first-time purchases being made by shared ownership applicants being under the age of 40 and in 2021-22, an estimated 56% of these purchases were made by one adult households.
Making a difference
“This scheme has really been able to make a difference to people’s lives in Shropshire by converting renters into owners where previously the affordability of ownership would be far beyond a single parent or applicant’s reach.
“With that first foot on the housing ladder, the next step is to allow these owners the opportunity to purchase the remaining amount of the property to own it wholly by the end term of their mortgage, this is called staircasing. This creates the ability to own a minimum of 25% of your residential property at the outset and purchase the remaining when you are in a much better financial position to do so.
“It is something that helps young families who are relatively cash-strapped with household bills and childcare to use their disposable income as their children grow to attain a larger equity of their current home. It will also alleviate the offset rental fee charged by housing associations for the percentage ownership share they hold.
“I would advise all potential purchasers open to the idea of staircasing to make contact with the local council or association of the area they wish to purchase and gather the information on the application process as all third-party providers will work differently. Then contact Dwello Mortgages to discuss your financial options in greater detail.”
