Can I Remortgage a Right to Buy Property?
Answered on 20 March 2024 by Nick Mendes
I have just taken out a mortgage on a Right to Buy property. The property is worth about £200k and as a Right to Buy tenant I got a discount of £75k. So I bought the house for £125k and that means I have £75k in equity in the property. I am in a 5 year mortgage term. How early can I remortgage to raise £35k from the property for an extension?
Yes, it is generally possible to remortgage a Right to Buy property.
What Is a Right to Buy Property?
Right to Buy is a government scheme in the United Kingdom that allows eligible council or housing association tenants to buy their home at a discount. Once you've exercised your Right to Buy and become the owner of the property, you can explore remortgaging options.
The property discount can be up to 70% or £110,500 in London and £82,800 for properties outside London.
The discount you could potentially receive depends on:
- How long you’ve been a tenant with a public sector landlord
- The type of property you want to buy
- The value of the property
To see if you quality for Right to Buy, read our Right to Buy guide.
How Do I Remortgage a Right to Buy Property?
Remortgaging involves switching your existing mortgage to a new one with a new lender. Alternatively, you can switch to a new product and stay with the same lender via a product transfer. People often choose to switch to a new product for various reasons, such as securing a better interest rate, releasing equity, or changing the terms of the mortgage.
When remortgaging a Right to Buy property, you'll need to go through the standard mortgage application process. The lender will assess your financial situation, creditworthiness, and the value of the property. Keep in mind that the property's value may have increased since you purchased it, which could be beneficial in terms of obtaining a more favourable mortgage deal.
Can I Borrow More on a Right to Buy Mortgage?
Yes, you can borrow more money on a Right to Buy mortgage. However, you must speak not only to your mortgage lender, but also your local authority who will have to approve the additional borrowing over and above the discounted purchase price.
As stated on the Government website: "You can remortgage your home at any time. However, before doing this, you should talk to your landlord and obtain professional advice particularly if you are considering borrowing extra money". Following from this and if response to your question above, it is possible to remortgage within the pre-emption period, however your choice of lenders will be limited, and there will almost certainly be a redemption penalty on the 5 year product you have just taken out that will need to be taken into consideration.
As you're looking to fund a home improvement, it could be worth looking at alternative methods to be able to fund this, you can find everything in our funding home improvements guide.
It's advisable to speak with a broker to guide you through the remortgaging process. They can help you find suitable mortgage products and navigate any specific requirements related to your Right to Buy property. Additionally, consider comparing offers from different lenders to ensure you get the best terms for your remortgage.
If you wish to discuss your options in more detail, then please call us on 0330 433 2927.
Ask The Mortgage Experts answers are based on the information provided and do not constitute advice under the Financial Services & Markets Act. They reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them. We recommend you seek professional advice with regard to any of these topics where appropriate.