Many companies try to support servicemen and women in any way they can. And while no mortgage company will admit to making things more difficult for those who have served in the military, getting a mortgage is often one of the biggest problems faced when returning to civilian life.
We hear from many individuals who have served in the army, navy and air force who are struggling to navigate the choices when it comes to buying a house. If you have served in the Armed Forces and want to buy a house, read on to find out how you can achieve your dreams of home ownership.
This article will cover the following topics.
- Can Armed Forces personnel get a mortgage?
- Is there assistance available for ex-servicemen and women?
- The Armed Forces help-to-buy scheme
- Can I use the Armed Forces help-to-buy scheme when retired?
- When can I find the best rates on military mortgages?
- Are buy to let mortgage available to me in the military?
- Where can I speak to a specialist military mortgage advisor?
Can Armed Forces personnel get a mortgage?
Yes! There is no reason servicemen and women shouldn’t be able to secure a mortgage. While you might face more challenges than someone who has followed a different career path, you should still have access to the same mortgage products.
Entry-level soldiers might be on lower income which can be problematic, but even higher-ranking officers can also struggle. One of the main issues is when overseas deployment leads to gaps in your credit and address history. Through no fault of your own, you may find that some lenders don’t look past your credit score.
The good news is that there are some more progressive and forward-thinking lenders that are more receptive to this type of work history.
There are lenders who specialise in British Army mortgages, British Navy mortgages, Air Force mortgages, Royal Marines mortgages, mortgages for ex-military personnel in the UK, mortgages for ex-military personnel based overseas and mortgages for civilian support staff.
If this sounds like you, read on to find out how you can make the most of the government schemes available to you. We’ll also share our top tips on how to ensure your application is more likely to be accepted by a lender.
Is there assistance available for ex-servicemen and women?
When you spend so much of your life stationed overseas and fighting for your country, it’s natural to want to return to the UK and buy own home. Thankfully, there are a few different schemes available that will help you to make this dream a reality.
The main schemes that you should become familiar with are:
- Requesting lender flexibility
- Help-to-buy for the Armed Forces (previously long service advance of pay)
- Government help-to-buy schemes
The easiest way to increase your chances of being accepted for a mortgage is to work with a specialist military mortgage lender. These lenders will be familiar with the challenges facing servicemen and women and will be able to look past things like non-standard income and poor credit.
These specialist lenders might be able to help you in the following ways.
- They can allow military borrowers to access a standard residential mortgage
- They can allow military borrowers stationed abroad to buy a home in the UK
- They can lend to those who will leave their properties unoccupied for long periods
- The can allow British Armed Forces personnel to purchase property overseas.
If you would like to be considered for any of the arrangements listed above, get in touch with our team today to find out how we can help.
The Armed Forces help-to-buy scheme
Just like the government-backed help-to-buy scheme, there is a military-specific version of this scheme called the Armed Forces help-to-buy Scheme. This helps military personnel get on the property ladder by providing them with an interest-free loan to cover the cost of the deposit and associated fees.
How much financial help can I expect to receive?
You will be able to borrow up to 50% of your annual salary, up to a maximum of £25,000. This is in the form of an interest-free loan, so you will need to pay this back. You can use this loan to provide a deposit, a percentage of the deposit, or to cover the other costs associated with buying a house.
Can I use this for any home purchase?
You can use this loan for your first home, moving to another property while you are stationed overseas, or moving to a new home because your family requirements have changed. You won’t be able to use the mortgage for a buy-to-let property as this type of scheme is for residential property only. This means that the home you buy will have to be your primary residence.
Who can apply?
Anyone serving in the British Army, Navy and Royal Air Force can apply. You will need to meet the following criteria.
- You need to have completed the required length of service
- You need to have no more than six months of service left
- You need to meet the right medical categories, although this can be flexible in some situations
How do I apply?
You can apply for the scheme online using the Joint Personnel Administration system. This is an online system created with the Ministry of Defence. You should also check with your chain of command before starting your application as they may be able to advise you.
How do I repay the loan?
Most of the loans are available on a 10-year repayment schedule. You will make monthly payments in addition to your mortgage repayments. As the loan is interest-free, you will only have to pay back your loan and no interest will be added.
How long should I expect to wait?
After your application has been submitted, you should expect to wait around two weeks for the loan drawdown. After this is complete, you can expect to experience normal mortgage application timescales.
How long will this scheme be available?
The scheme was first introduced in April 2014 and was only supposed to last for 3 years on the pilot scheme. It has now been extended to December 2019. If you are thinking about taking advantage of this scheme, you will need to have submitted your application for the help-to-buy loan by this point.
Can I use this scheme with the government’s help-to-buy scheme?
Yes! It’s possible to take advantage of both schemes in order to take advantage of the 5% deposit option. Not all lenders will be happy for you to use both schemes, but specialist military mortgage lenders will be familiar with the process.
The government scheme is limited to new build properties, so this could limit your choices. It’s also not available on properties worth more than £600,000.
Can I use this scheme with the help-to-buy ISA?
The help-to-buy ISA was introduced to help first-time buyers boost their deposit savings. As such, you will only be able to use both schemes if this is your first property, and even then some lenders may be reluctant to accept both schemes.
If you do use this scheme, for every £200 you save, the government will top up your savings by £50. The minimum payout if £400 and the maximum is £3000. This could help to boost your deposit, allowing you to get a better rate or secure a more expensive property.
Can I use this scheme for a shared ownership home?
You cannot use the Armed Forces help-to-buy scheme for shared ownership or shared equity homes. However, there is no reason you can’t apply for a mortgage on a shared ownership home independent of the Armed Forces help-to-buy scheme.
Can I have lodgers in my home?
It will all depend on your individual circumstances, but most will allow you to take in a lodger. Some lenders are more sensitive to the needs of military borrowers and understand that you might want to sublet your home or part of your home while you are on deployment. Speak to a specialist mortgage broker to find out more about which lenders are more likely to allow this.
Will I have to pay tax on my help-to-buy loan?
If your loan is over £10,000 you will likely have to pay tax on this. This can change the affordability of the loan so you should consider all of your options before making a final decision.
Can I use the Armed Forces help-to-buy scheme when retired?
As outlined above, you can only use the Armed Forces help-to-buy scheme when you are still in active service. Unfortunately, this means that you cannot use the Armed Forces help-to-buy scheme once you are retired.
If you have never owned a property before due to your active service, you may be able to use the government help-to-buy scheme to get on the property ladder. A specialist lender will be able to help you navigate the mortgage application and ensure lenders understand your unique position.
Can I still apply for the long service advance of pay?
The long service advance of pay scheme was ended in April 2014 to make way for the help to buy scheme. It isn’t clear if this will ever return. The long service advance of pay allowed servicemen and women to apply for an interest-free loan of up to £8,500 to help them get on the property ladder.
When can I find the best rates on military mortgages?
There aren’t really specific mortgages just for those in the military. Instead, you will need to find a broker who understands your circumstances and can help you present yourself in the best possible light to lenders. Once you have passed the initial lender checks, you will be able to access all of the same mortgage products as everyone else.
That said, there are things you can do to be able to improve the rates you are offered. These options are outlined below.
Increase your deposit
A healthy deposit is one of the easiest ways to ensure you have access to the best mortgage rates. When you can offer more deposit up front, this shows lenders that you are a low-risk borrower. As a non-standard applicant, increasing your deposit amount can be one of the easiest ways to get lenders to look past your lack of credit history.
Get your income in order
Military personnel are more likely to have irregular income. With most providers allowing you to borrow around 4.5x your annual salary, it’s important that you can show exactly what you earn every year. In some cases, you may be able to borrow as much as 5x your annual income, and in some rare cases, you will be able to borrow 6x your annual income.
It’s important to approach a specialist lender as they will be able to make sense of your income. Some military personnel will supplement their income with military disability payments or combat pay, which is sometimes referred to as operation allowance. Not all lenders will take these income sources into consideration and this can impact the amount you can borrow.
Fix your credit score
A long time spent overseas without any address history in the UK can be bad news for your credit score. It might seem unfair, but many lenders will use your credit score as the first opportunity to rule out an application. Lenders will also reserve the best rates for those with the best credit scores.
By seeking the advice of a specialist lender and working with a broker who understands the non-standard circumstances of military personnel, you can often navigate around these issues. Some lenders are more flexible than others when it comes to looking at credit scores, so it pays to shop around.
Choose the right property
It doesn’t matter if you are military, ex-military or a civilian, some houses make it harder to secure a mortgage than others. A great example of this is timber frame houses or those with thatched roofs. Since these are considered to be non-standard construction it can be harder to secure a mortgage on these types of homes. Only a specialist will be able to tell you if you are likely to be able to secure a mortgage on a particular property.
Things you can’t control
Age is an important factor in the mortgage application. Some mortgage providers will not offer a mortgage to anyone over 75, but some will disregard the age provided the borrower will still be able to make payments well into retirement. In general, younger borrowers will have an easier time as they will have plenty of time before retirement.
Are buy to let mortgage available to me in the military?
You can secure a buy-to-let mortgage when you’re in the military, but you won’t be able to use the help-to-buy scheme to do so. If you choose to purchase a buy-to-let property, you will be subject to the same rules as anyone else. A specialist military mortgage provider might be more willing to be flexible.
You will typically need a higher deposit to secure a buy-to-let mortgage. Some lenders will also base their decision on the viability of the investment. For example, they will want to see rental yield forecasts will cover at least 125% of the mortgage payments. For a first-time landlord, some lenders will want to see earnings in excess of £25,000.
Where can I speak to a specialist military mortgage advisor?
If you’d like to find out more about the mortgage options available to military personnel, enquire now to get in touch with our specialist team today. We will be able to advise you on the next steps to take and how to increase your chances of matching with a mortgage provider.