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I bought my first property in June 2014 under the UK Help To Buy scheme. I have until June 2019 before I start paying interest on the Help to Buy equity loan. The property's increased in value by around £30k.

I have been thinking of buying another property, but not currently decided exactly what to do with it (e.g. move in, start a family, put on rent, renovate and sell).

My question is on financing this project / potential new home. Can I re-mortgage the apartment and use the increased value as capital to go towards the deposit of a new property? Is this possible or plausible, and what other potential options are there?

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    I'm curious why exactly you're looking to buy a second property when you barely have paid anything into the first? What's your thought process here?
    – Joe
    Aug 30, 2016 at 22:25
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    If you are going to buy a second property you should decide what you plan to do with it before you buy, because this may determine the type of property and price range you go for. One you live in would be different from one you would rent out which would be different from one you would fix up and re-sell.
    – Victor
    Aug 30, 2016 at 23:00
  • Remember remortgaging is going to involve it's own costs too. So try using that as a deduction on your equity too. And the equity you assume isn't the one the bank is going to use, they will do their own valuation.
    – DumbCoder
    Aug 31, 2016 at 10:11
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    To add to Victor's point: residential mortgages and buy-to-let mortgages have different requirements. While you can, for example, buy a house to live in, and later rent it out, you must tell the mortgage provider, who may refuse permission, or charge you a fee and impose new conditions, etc.
    – Steve Melnikoff
    Aug 31, 2016 at 12:37

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I've had a hard time finding out details on remortgaging Help to Buy loans myself, but found one article (http://www.thisismoney.co.uk/money/mortgageshome/article-3038831/Help-Buy-borrowers-risk-missing-best-remortgage-deals.html) which points out it IS possible. But also that there aren't many lenders offering such deals out there. The article lists a number of lenders that do offer these programs, and the extra requirements on equity you might have to have.

It sounds like it's going to be critical to know how much equity you've built up. Since part of the valuation increase will be credited to Help to Buy, you won't get all the £30k increase you've mentioned. Instead, I believe you'll only get 80%, so £24k. Which would mean your total equity is £24k + £7k = £31k, plus whatever you might have already paid off. I'm going to assume there isn't much you've paid off, so will assume just over 18%. (31/170)

While this is higher than most of the equity limits mentioned in the above article, keep in mind you'd only get cash out corresponding to the difference between your current equity amount and the equity required for the loan. For example, if you went with a loan requiring 15% equity to qualify, you'd only have 3% over that, and thus get £5.1k out. And that's before any fees you might have to pay! (You might have new origination fees, but you also might have early repayment fees.)

Maybe you could pursue a lower money down refi and get to keep more, but the same article points out that Help to Buy might consider that too risky for you, and refuse to allow the refi.

I think it's worth shopping around to get actual numbers for your exact situation, but personally it doesn't sound like you have enough equity yet to get much cash out of a refi. Perhaps you'll get lucky though. Best of luck!

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