Staircasing Mortgage

14/05/2019
As and when you decide to staircase your shared ownership home, you'll need to pay for your increased ownership percentage by using either a staircasing mortgage - the subject of this article - or by cash from savings, gifts or perhaps another source such as the proceeds of a probate sale.

This article examines:



Staircasing? Looking for a Staircasing Mortgage?

Take advantage of a free consultation with our expert independent mortgage brokers who specialise in staircasing mortgages.

They'll help you select the right mortgage for your needs from tens of 1,000s of products on the market and will help you streamline your application.

We also provide experienced shared ownership staircasing solicitors and RICS staircasing valuers (click either to get a quote).

* Fixed Fee – No Sale No Fee – On all Mortgage Lender Panels




    1

    Should you pay for your staircasing with cash or a staircasing mortgage?

If you are in the happy position of being able to pay for your staircasing with your own savings or from a gift or gifts or from probate (so funds come from a deceased person's estate willed to you) you should do so.

This is mainly because you won't have to pay interest! Additionally staircasing using a mortgage takes longer because of the normal process when you apply for a mortgage (click to find out more) and then, assuming success, correctly passing the funds through to the housing association.

If you are paying cash you should note, however, that your solicitor needs to be satisfied that your funds come from an acceptable source. In other words, generally, if your funds come via a non-EEA (European Economic Area - which is the European Union + Iceland, Norway and Liechtenstein) bank or source, there's a high chance that your solicitor will not accept them.

Additionally you should note that there's a clear difference in a lender's eyes between a gift and a loan. If you are intending to pay for your staircasing via a loan - i.e. money which is due to be paid back - you will need to inform your present mortgage lender and get their permission because they might deduce that you are effectively putting a second charge on the property and thus affecting their own security in the event of defaults and repossession.

In the majority of cases, however, people staircase using a staircasing mortgage (normally a remortgage - click to find out more about the remortgage process).


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    2

    At what point in the process should you apply for a staircasing mortgage?

You would normally apply for your staircasing mortgage once you've had your RICS staircasing valuation returned (click to find out more).

You will already have made your initial application to the housing association to staircase after clearing any debt and paying over any application fees. You'll always need to get a RICS staircasing valuation as part of the process and when this has been returned, you'll have a concrete professional representation of how much money you will want to have loaned to you from your lender.

You'll normally have to instruct a solicitor to carry out your staircasing conveyancing at latest when you have your valuation returned as well, because you'll need to pass these details to your housing association. Additionally, when you get your mortgage or remortgage, the lender will require your solicitor to act for it as part of its own process.

You might choose to wait until you've had your memorandum of staircasing returned (click to find out more) - this is the document where the housing association sets down the extra percentage you're intending to buy and what it will cost you - however you should always bear in mind that any mortgage or remortgage process is likely to take 4 or 5 weeks possibly.

Above all, you need to ensure that your whole staircasing process post-RICS valuation doesn't exceed 3 months because you'll then have to pay for either a retype of your valuation - if your housing association accepts this - or a completely new valuation.

As mentioned above, all mortgage processes involve a few stages; including initial application, decision in principle, mortgage in principle and finally the mortgage offer, ready for final completion.


    3

    How should you select a staircasing mortgage?

You can approach your current lender for a remortgage or you can approach another lender for a completely new mortgage product, in which case the new lender clears your current mortgage in entirety and you then make your repayments for the whole mortgage amount to the new lender; this is explained our article about the remortgage process.

We would always recommend that you have a consultation with an independent mortgage broker, however. They aren't tied to any particular lender's products and can find the right mortgage for your individual needs from tens of 1000s of products. They'll only recommend mortgages which you're likely to be accepted for and whatever and however you pay for their advice, it normally pays for itself after a few (reduced) monthly mortgage repayments.


    4

    How do staircasing mortgages differ from standard mortgages?

Staircasing mortgages - which are normally remortgages - require the same eligibility and affordability checks which you had to go through to get your mortgage in principle for your main mortgage. 

Most of the time, the additional mortgage sum will be less than or at most equal to the sum you borrowed to buy your first premium (allowing for inflation) however in theory you could get one for staircasing by an amount larger than your initial premium. 

As someone who already owns a property, assuming you've kept up-to-date with all the required payments and continue to be in employment (or have regular remuneration), you're normally in a stronger position for getting your loan than you were before you bought your first premium. 

That said, you should note that different mortgage lenders have different mortgage requirements for the solicitor to adhere to.  

Some lenders won't ask the solicitor to do anything more than their obligations under the Council of Mortgage Lenders' (CML) guidance but some mortgage lenders request additional information to be provided to them before they will agree for the mortgage to be issued. For example, Paragon Mortgages require the solicitor to provide copies of planning permission, building regulations and rights of way , however Santander Plc doesn't require this.

If there is an existing charge registered on the property, then the solicitor requests the mortgage lender to provide a current mortgage statement in order to discharge the balance on completion.

If you are adding someone to the title while staircasing this will also occur additional costs because this will involve a transfer of equity. You will also need to get consent from your housing association to do this.

Official Local Authority Search or Personal Regulated Local Authority Search or Indemnity Insurance?

Your lender normally requires you to pay for a Local Authority Search as part of its checks,

Different mortgage lenders have different criteria with regards to the local authority search. Some mortgage lenders are happy for you to take out local authority search indemnity insurance, some will not and expect you to obtain either an official local authority search or a personal regulated local authority search (click to find out the difference between the two).

This affects you both in the cost and in the time it takes to obtain the desired information. For local authority search indemnity insurance the policy is usually issued within minutes and normally costs between £25 and c.£200 depending on the value of your property.

Official local authority searches obtained directly from the council vary in price, ranging from around £60 to around £300, whereas personal regulated local authority searches normally cost around £150.

There are also some mortgage lenders who require you to provide environmental searches, chancel indemnity and water and drainage searches.



    5

    Will your staircasing mean you have to pay stamp duty?

It might do.

The main parameters are:
  • You won't have to pay any further stamp duty full stop if you opted for a Market Value Election when you bought your first premium (this is when you choose to pay the stamp duty based on 100% of the value of the property).
  • If you only paid stamp duty on your first premium (if there was any to pay) then you'll have to pay further stamp duty if your total percentage holding exceeds 80% after staircasing.
Click to find out more about Stamp Duty Land Tax for Staircasing

If you are in any doubt about stamp duty matters, you should always contact HMRC (telephone 0300 200 3510 and opening times Monday to Friday: 8:30am to 5pm and closed weekends) because payment of stamp duty is your personal responsibility.


    6

    What happens after you've received your staircasing mortgage offer?

You're then onto the very final stage of your staircasing process, which is the final conveyancing and registration procedure.

Staircasing? Looking for a Staircasing Mortgage?

Take advantage of a free consultation with our expert independent mortgage brokers who specialise in staircasing mortgages.

They'll help you select the right mortgage for your needs from tens of 1,000s of products on the market and will help you streamline your application.

We also provide experienced shared ownership staircasing solicitors and RICS staircasing valuers (click either to get a quote).

* Fixed Fee – No Sale No Fee – On all Mortgage Lender Panels



Related News Articles

 
Memorandum of Staircasing
09/09/2019
Remortgage Process Explained
13/10/2017
Staircasing Process
02/09/2019
Stamp Duty Land Tax for Staircasing
11/12/2018
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