What is staircasing?
Staircasing means purchasing a larger share of your shared ownership home from the housing association. You can usually buy additional shares in increments of 10% or more until you own the property outright. Each time you staircase, your rent reduces because you own more of the home.
Once you own 100% of the property, you stop paying rent altogether and become the sole owner. At this point you may also be able to convert from a leasehold to a freehold, depending on the type of property.
How much does staircasing cost?
The cost of each additional share is based on the current market value of the property at the time you staircase, not the original purchase price. You will need to pay for an independent valuation, which the housing association will use to calculate the price of the extra share.
You may need to remortgage or extend your existing mortgage to fund the purchase. There are also legal fees to cover since the change in ownership share must be formally recorded. Your adviser can help you weigh up whether the savings on rent justify the cost of staircasing at any given time.
When does staircasing make sense?
Staircasing tends to make the most financial sense when property values in your area have remained stable or grown, because you benefit from the equity in the share you already own. If your income has increased or your mortgage rate is low, the reduced rent can make the higher mortgage payment worthwhile.
It is worth running the numbers carefully each time. If property values have risen sharply, the additional share will cost more, so the rent savings may take longer to pay back. Your adviser can model the costs and help you decide the right time to staircase.