FairShare – the shared ownership scheme enables you to: buy a share of a property that you can afford – between 50% and 90%; pay rent at well below market value on the rest; and, buy further shares of your home as and when you can afford to – a process known as staircasing.
Buying more of your home later
The FairShare shared ownership model gives you the opportunity to get onto the property ladder by buying a share of a property that you can afford. But just as importantly, the model is designed to allow you to buy additional shares in your home whenever it suits you. Buying additional shares in your home is referred to as staircasing and you’re free to start at any time. If you eventually buy all of the remaining shares in your home from your FairShare partner you will have staircased out completely. If you decide to staircase out completely within the first 5 years your FairShare partner will give you £300 towards your legal and valuation costs.
The cost of staircasing
When you’re ready to begin staircasing, you should contact your FairShare partner to carry out a valuation of the property. You will be required to staircase out in blocks of 10% shares. The cost to buy any additional share will be based on either the current market value, or the original purchase price – whichever is the greater. You may need to arrange a mortgage to buy the additional share.
Staircasing after property values have risen
When you’re ready to buy an additional share of your home, an up-to-date property valuation will be carried out. If the value of your home has risen, the current market value will be used to calculate the cost of buying any additional share. Example: To buy an additional 20% share of a property currently worth £110,000, will cost 20% of £110,000 – that’s £22,000.
Example: Buying additional 20% share after property value rises
If your home’s value has risen and you want to buy an additional 20% share, it will cost you 20% of its current value. If your home is worth £110,000, it will cost you 20% of £110,000 – that’s £22,000.
Staircasing after property values have fallen
When you’re ready to buy an additional share in your home, an up-to-date property valuation will be carried out. If the value of your home has fallen, the original purchase price will be used to calculate the cost of buying any additional share. Example: To buy an additional 20% share of a property with an original purchase price of £100,000, will cost 20% of £100,000 – that’s £20,000.
Example: Buying additional 20% share after property value falls
If your home’s value has fallen and you want to buy an additional 20% share, it will cost you 20% of its original purchase price. If your home was originally worth £100,000, it will cost you 20% of £100,000 – that’s £20,000.
Staircasing reduces the amount of rent you pay
Having purchased your home through FairShare you can buy an additional share of your home at any time. For example if you originally bought a 50% share of your home and you decide to purchase an additional 20% share this will bring your equity share in the property up to 70%. This reduces the share owned by your FairShare partner to 30% and the amount of rent you pay will reduce accordingly.
What happens when I sell the property?
If you sell the property you will need to pay your FairShare Partner an amount which will be calculated on the basis of:
– percentage equity share still owned by the FairShare partner; and
– current market value of the property, or value when first purchased – whichever is the greater.
If for example your FairShare partner still owns 50% of the home at the time you sell, then the amount due to them will be 50% of the property valuation at the time. Or, 50% of the original purchase price, whichever is the greater. The terms of the FairShare Lease sets down all of the requirements and conditions that you will have to meet.
In a typical example where a homeowner who owns 50% equity share in their home, and sells it for £150,000 – the FairShare Partner will receive £75,000 based on their 50% equity share. The homeowner would also receive £75,000 in respect of their 50% equity share. The homeowner would then need to pay off any outstanding mortgage balance with their share of the money.
Help with staircasing
If the homeowner staircases out completely within the first 5 years, i.e. achieves full home ownership by the end of year 5, the homeowner’s FairShare partner will make a single one-off contribution of £300 towards the homeowner’s valuation and solicitor’s fees. This payment will be made when the homeowner completes the process and is in full home ownership.