Staircasing Mortgages: A Guide to Financing Your Shared Ownership
A staircasing mortgage is a specific type of product that allows shared ownership homeowners to buy more equity in their property and reduce their monthly rent. Whether you are looking to increase your stake by 1% or reach full 100% ownership, financing the move requires a specific type of lending that accounts for your increasing share of the property’s value.
Unlike a standard residential mortgage, a staircasing mortgage involves coordinating with your current lender for a further advance or switching to a new provider via a remortgage to release the necessary funds. Navigating this process successfully relies on a professional RICS valuation to set the price and a specialist solicitor to ensure the lender's interest is correctly secured alongside the all-important Memorandum of Staircasing.
How does a staircasing mortgage work?
Because you are essentially buying a second (or third) portion of your own home, the lender must treat it as a new purchase transaction. You aren't just changing a monthly payment; you are changing the legal "Security" that the bank holds.
The two main ways a staircasing mortgage works are as follows:
Further Advance | Remortgage (Switch to a new lender) |
This is often the path of least resistance because you stay with your existing lender. You ask your current mortgage provider for an additional loan specifically for staircasing.
| You move your entire mortgage, the original debt plus the cost of the new shares, to a completely new mortgage lender.
|
Our panel of mortgage brokers present the best options available to you, for any type of mortgage, including:
- First-time buyers, home movers and buy-to-lets
- Employed, self-employed, or director mortgages
- Shared Ownership, or affordable housing mortgages
- Guarantor mortgages
Summary Table: Comparison of Options
Feature | Further Advance | Remortgage |
Lender | Same as current | Brand new |
Costs | Usually Lower | New product fee, broker fee, valuation fee |
Interest Rate | Only for the new "chunk", which isn't good if rates are lower now than they were when you took out the original mortgage | For the entire loan amount |
Speed | Generally within a few days | Standard remortgage time of 2 to 4 weeks |
Can you pay cash when staircasing?
You do not need to pay for your staircasing using mortgage money. You can do this using your own personal savings or a gift from family. You will instead complete source of funds checks with your solicitor.
If you have a mortgage, then your mortgage lender will need to be informed that you have purchased more shares in the property, as they must be informed of all changes to the lease that they have a mortgage secured on.
Can I Use Equity Instead of a Cash Deposit?
Yes, you can, and this is one of the best things about being a homeowner, even if you don't own 100% of the property. If your property has gone up in value, you can often use that equity growth as your deposit for the new mortgage.
For Example: You own 25% of a £200,000 home (£50,000). If the home is now worth £240,000, your 25% is worth £60,000. That £10,000 "profit" can often be used to satisfy the lender's deposit requirements for the next 25% share, meaning you don't have to find thousands in cash savings.
The Step-by-Step Financial Flow
The mechanical way the mortgage works during the transaction follows this specific sequence:
- 1
Staircasing Valuation:
An independent RICS valuation required to provide to the Housing Association for the Memorandum of Staircasing.
- 2
Mortgage Application:
You apply for a mortgage; further advance or new. You'll need to pass affordability and ID checks for a new mortgage product.
- 3
Mortgage Valuation:
A surveyor determines the current market value. The mortgage amount is based on this figure, not what you originally paid for the house. You can't use your independent valuation for the mortgage lender.
- 4
Mortgage Offer:
Once the lender is happy with your income and the valuation, they issue an offer. Crucially, the offer will be conditional on your solicitor confirming that the staircasing is happening simultaneously.
- 6
The Legal Work:
Your solicitor completes the staircasing work to meet with your mortgage lender's criteria.
- 6
The Drawdown:
On completion day, the mortgage lender sends the funds to your solicitor.
- 7
Transfer:
Your solicitor sends that money to the Housing Association and pays off the existing mortgage (if applicable).
- 8
Legal Result:
Your rent decreases, your mortgage payment increases, and your solicitor registers the Memorandum of Staircasing at the Land Registry to prove the bank now has a "Charge" over a larger portion of the property.
Frequently Asked Questions About Staircasing Mortgages
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh has written extensively for SAM with expertise on sale and purchase conveyancing, the Help to Buy redemption process, equity transfers and deeds, leasehold reform, RICS home surveys, shared ownership, and independent legal advice for specialist mortgage products and ownership structures.
