How Does Remortgaging Shared Ownership Work?
Remortgaging a shared ownership property follows many of the same principles as a standard remortgage, but there are important differences to be aware of. When you remortgage, you are switching your mortgage on your owned share of the property to a new deal, either with your existing lender or a different one.
Key differences from a standard remortgage include:
- You only mortgage your share — Your mortgage covers only the percentage of the property that you own. If you own 40% of a property worth 250,000 pounds, your mortgage relates to the 100,000-pound share, not the full property value.
- Rent continues on the unowned share — You will continue to pay rent to the housing association on the share you do not own. This rent is factored into your affordability assessment by lenders.
- Housing association involvement — Your housing association is a party to the arrangement, and their lease terms and requirements can affect which lenders are willing to offer you a mortgage.
- Fewer lender options — Not all lenders offer shared ownership mortgages, so your choice may be more limited than with a standard remortgage. However, there are still plenty of competitive options available.
The process itself involves applying to a new lender (or your existing one), having your share valued, undergoing affordability checks, and then completing the legal work to transfer the mortgage. A conveyancing solicitor with experience in shared ownership transactions is essential, as the legal process is slightly more involved.
Lender Criteria for Shared Ownership Remortgages
Lenders who offer shared ownership mortgages have specific criteria that you will need to meet. Understanding these requirements in advance can help you prepare your application and avoid unnecessary setbacks.
Affordability assessment
When assessing your affordability, lenders will consider not only your mortgage payments but also the rent you pay to the housing association on the unowned share. This combined housing cost means that your borrowing capacity may be lower than it would be for a standard mortgage of the same amount. Lenders will also factor in your other financial commitments, including any debts, childcare costs, and regular expenditure.
Minimum share ownership
Some lenders have minimum share requirements. While many will lend on shares as low as 25%, others may require you to own at least 40% or 50% of the property. If your share is on the lower end, you may have fewer lender options, but specialist brokers can help identify those that are willing to work with smaller shares.
Lease terms and housing association approval
Lenders will review the lease terms set by the housing association. Certain lease conditions can affect whether a lender is willing to offer a mortgage, including restrictions on subletting, provisions for the housing association to buy back the property, and any clauses relating to improvements or alterations. Your housing association may also need to approve the new lender, which can add time to the process.
Credit requirements
As with any mortgage application, your credit history will be assessed. Lenders will check your credit report for any adverse markers such as missed payments, defaults, or County Court Judgements (CCJs). Maintaining a clean credit record and being on the electoral roll will strengthen your application.
Property type and condition
The property itself will need to meet the lender's criteria regarding its type, construction, and condition. Properties with non-standard construction, structural issues, or in poor condition may face additional scrutiny or be declined by some lenders.
Staircasing: Buying More of Your Home
Staircasing is the process of buying additional shares in your shared ownership property, and it is closely linked to remortgaging. Many shared ownership homeowners choose to staircase and remortgage at the same time, using a new mortgage to fund the purchase of a larger share.
How staircasing works
When you staircase, you buy an additional percentage of the property from the housing association. The cost of the additional share is based on the current market value of the property, not the original purchase price. For example, if your property is now worth 300,000 pounds and you want to buy an additional 10% share, you would pay 30,000 pounds for that share.
Staircasing to 100%
If you staircase to 100%, you become the outright owner of the property (subject to any leasehold arrangements). This means you no longer pay rent to the housing association, and your mortgage becomes a standard residential mortgage. Owning 100% opens up the full range of lender options and can often result in a more competitive interest rate.
Partial staircasing
You do not have to staircase to 100% in one go. Many homeowners increase their share incrementally over time, perhaps moving from 25% to 50%, and then to 75%, before eventually reaching full ownership. Each time you staircase, your rent on the unowned share reduces accordingly.
Costs of staircasing
Staircasing involves several costs beyond the purchase price of the additional share:
- Valuation fee — You will need an independent RICS valuation to determine the current market value of the property.
- Legal fees — A solicitor will handle the legal work for the staircasing transaction.
- Stamp Duty Land Tax — Depending on the value of the share you are purchasing and whether you made a Stamp Duty election at the time of your original purchase, you may need to pay SDLT on the additional share.
- Mortgage arrangement fees — If you are remortgaging to fund the staircasing, there may be product fees associated with the new mortgage deal.
Before deciding to staircase, it is worth calculating the total costs and weighing them against the benefits of owning a larger share, including reduced rent payments and increased equity.
