Buying a home when you have a career in the armed forces can be challenging. You’re faced with a low starting salary and, even after years of service, may have a lack of credit history as a result of continually moving around with postings in the UK or overseas. It’s not surprising, then, that there’s a low degree of home ownership among those in the armed forces. To help turn this around, the government launched a 3-year pilot of the Forces Help to Buy scheme in April 2014, which has since been extended and is currently set to end on 31st December 2022.
This scheme aims to help first-time buyers get on the property ladder as well as those who need to move home because they’ve been reassigned elsewhere or their family circumstances have changed. It also aims to enable eligible military personnel to embark on self-build projects. At Trinity Finance, we work closely with lenders specialising in military mortgages and our mortgage brokers are well versed in the workings of the Forces Help to Buy scheme. We can check your eligibility for this scheme and advise you on the other schemes that are available to help you buy a home.
How does the Forces Help to Buy scheme work?
With this scheme, you can borrow up to 50% of your annual salary, up to a maximum of £25,000. You can use this loan towards a deposit for your home as well as other home-buying costs, such as the estate agent’s fees, your solicitor’s fees, a surveyor’s fees and the Land Registry fee. The loan is interest-free and has to be repaid within a 10-year term. To repay the loan, the amount you borrow will be divided into monthly payments that are spread across this term. You can choose whether to begin making those payments straight away, to wait until 6 months after you’ve acquired the loan or to make them within your last 10 years of service. You can also make overpayments if you wish to clear your debt sooner.
Eligibility for the Forces Help to Buy scheme
To be eligible for this scheme, you need to meet certain criteria:
- You need to be in regular service
- You must have completed a specified length of service, depending on which branch of the armed forces you’re in
- You must have at least 6 months left to serve at the time of application
- You need to meet specified medical categories
Exceptions to these rules can apply in some cases, such as on certain medical and personal grounds.
How to apply for this scheme
You can use the online application service via the Joint Personnel Administration system to apply for a loan with this scheme. An online guide is available on the system to help you complete your application. You need to submit your application at least 6 weeks before the anticipated completion date of your purchase.
It’s important to let your mortgage broker know if you wish to apply for the Forces Help to Buy scheme so that they can notify the relevant lender, who will factor the loan into your affordability calculations. Just give us a call on 01322 907 000 for a tailored service that takes your military lifestyle into account when considering your mortgage needs. If you prefer, send your details to us by email at email@example.com or via our contact form and one of our military mortgage experts will reply to you as quickly as possible.
Can you benefit from other government-backed schemes?
There are various other schemes you can take advantage of to help you buy a home.
Help to Buy: Equity Loan scheme
This scheme is aimed at first-time buyers and allows you to buy a newly built property with just a 5% deposit. The government will provide you with an equity loan for up to 20% of the property price (or up to 40% for a property in London) and then you just need a repayment mortgage for the other 75%. This lower mortgage requirement will give you access to better rates and the equity loan from the government will be interest-free for the first 5 years.
Under this scheme, which is currently available until the end of March 2023, you have the option to increase your equity share in the property when you’re in a position to do so. This has to be done in increments of at least 10% of the property’s market value at the time. The equity loan must be repaid either when the loan term ends, you sell the property or the repayment mortgage has been paid off.
The Help to Buy: Equity Loan scheme can be used in conjunction with the Forces Help to Buy scheme. It’s important to note that not all lenders will accept both, however. If you wish to benefit from both schemes, let your dedicated mortgage broker know as they will be familiar with which lenders will allow you to use them together.
Help to Buy: Shared Ownership scheme
With this scheme, you can use your deposit and a mortgage to buy a percentage of a property – between 25% and 75% of its value – and pay rent for the remaining share. When you’re able to, you can increase your share of the property by making part payments until you eventually own it outright. Under this scheme, you can have shared ownership of a newly built property or an existing shared ownership property, which you’ll be able to find via housing association resale programmes.
First Homes scheme
As its name suggests, this scheme is aimed at first-time buyers. You can benefit from a discount of at least 30% on the price of a newly built property. You are prioritised as a serving member of the armed forces or a recent veteran, enabling you to buy a home in the area you need to live in without having to meet the local connection criteria set by the local council. Property prices under the First Homes scheme are capped at £250,000 after the discount has been taken into account (or £420,000 for properties in London). Local councils can set lower price caps at their discretion.
To use this scheme, you need a minimum of 5% deposit, which is based on the discounted price and, therefore, much easier to save. You need to take out a mortgage for the balance – which must be at least 50% of the discounted purchase price – and this smaller loan-to-value (LTV) ratio means you’ll benefit from better rates.
95% mortgage guarantee scheme
This scheme aims to help first-time buyers get on the property ladder and existing homeowners move onwards with just a 5% deposit. You need to take out a repayment mortgage with a fixed rate for the balance. This scheme applies to properties priced up to £600,000 and is currently open for applications until 31st December 2022 although this will be reviewed.
To encourage lenders to participate in the 95% mortgage guarantee scheme, the government has agreed to cover some of the costs in the event that a borrower defaults on their mortgage payments. One of the terms that lenders have to meet in return is to provide a mortgage product with a 5-year fixed rate among their range of deals. Whilst you don’t have to accept a deal with a fixed rate for 5 years, doing so will give you the security of knowing that your rate won’t fluctuate during that time and help you to budget for your monthly repayments.
Are there any restrictions under the Forces Help to Buy scheme?
The property you’re buying must be for your own immediate residential use or that of your immediate family. The exception to this is if you’re stationed overseas at the time of your application and purchase. As this loan is intended for your main residence, it cannot be used to purchase a buy-to-let property or other second property. In some instances, this loan can be used to modify or extend an existing property. The property you wish to buy must also have a standard construction and be mortgageable. This means, for example, that you cannot purchase a mobile home, houseboat or caravan.
What happens if you leave the military after using the scheme?
Ideally, you need to repay the Forces Help to Buy loan before you leave the armed forces. If that’s not possible, you will need to keep making your monthly repayments after you’ve left until the outstanding balance has been repaid in full. If you’re entitled to terminal benefits at that point, such as a resettlement grant, automatic deductions will be made from those benefits to repay the loan.
Get impartial advice about the Forces Help to Buy scheme and others available
Trying to buy a home when you’re in the military can throw several obstacles in your way so it makes sense to take advantage of a scheme that can help you get onto or move up the property ladder. At Trinity Finance, we work closely with specialist lenders who offer military mortgages. They take a more flexible approach when it comes to their lending criteria and terms, allowing for a non-standard income structure, lack of credit history and the possibility of deployment.
Our mortgage brokers, located throughout Kent, London and Edinburgh, know which of these lenders will accept a Forces Help to Buy loan as your deposit. They can also provide you with further details on the other government-backed schemes available and ascertain which lenders will allow you to benefit from more than one of them, depending on your circumstances. Simply get in touch with us on 01322 907 000 for impartial advice from one of our mortgage experts. Alternatively, send an email to us at firstname.lastname@example.org or an enquiry via our contact form and we will reply to you as quickly as possible with more information.