Yes, there are specialist military mortgages available. Servicemen and women will usually find it more difficult to get a standard mortgage, as they will have a different financial history to civilians, and they move around a lot due to their job.
Where non-military people will generally have one address and have had recent bills in their name, military personnel have very different circumstances. Due to these circumstances, people in the military may even have a poor credit rating due to not having any regular bills that they pay each month to help build up their credit score.
In this article
What support do members of the military get with mortgages?
Forces Help to Buy
Forces Help to Buy FAQs
What should I do before applying for a mortgage?
How long does the mortgage application take?
Due to the combination of these factors, they will not usually meet the lending criteria of a standard mortgage from a high street lender. The fact that the property might be unoccupied for long periods of time can also be considered as a risk that lenders do not want to take on.
Fortunately, members of the military services are able to use a specialist military mortgage lender instead, to enable them to buy a property while they are serving. There are specialist lenders for:
– British army mortgages
– Navy and army mortgages
– Air force mortgages
– Marine corps mortgages
– Ex-military personnel mortgages
– Mortgages for civilian support staff
What support do members of the military get with mortgages?
There are two main schemes/types of support that help the military to get mortgages, which are:
Increased lender flexibility
Military personnel receive support for getting onto the property ladder by using specialist lenders who provide more flexibility than the standard mortgage lenders. These lenders understand the different circumstances and their lending criteria is adapted to help armed forces servicemen and servicewomen to get a mortgage approved.
How do specialist lenders help?
Specialist lenders will understand that military life is different to civilian and details such as a low credit score, non-standard income and moving around a lot will be accepted under their criteria.
The specialist lenders may also allow extra flexibility such as:
Allowing the property to remain unoccupied for long periods
Mortgage lenders will usually be concerned about vandalism and damage to the property if it is staying unoccupied for long periods of time. If there is nobody looking after the upkeep of the home, problems such as leaking pipes or damp could cause damage to the property.
Specialist military lenders will allow for periods of inoccupancy within the mortgage terms.
Consent to let
They may also allow the homeowner to let the property out while they are living elsewhere, so that they can make a rental income from the property when they are away for long periods. Usually, mortgage lenders would ask homeowners to pay for a consent to let or would require them to switch to a buy-to-let mortgage before they are allowed to rent the property out.
The other area of flexibility offered by specialist military mortgage lenders is that the homeowner can live abroad and still buy a property in the UK.
If military personnel were to apply for a standard mortgage, they would generally get declined due to these types of circumstances. Therefore, it is better to use a broker such as Boon Brokers who will find a specialist military lender, rather than have a declined mortgage application that may affect your credit file.
Forces Help to Buy
The government provides a Forces Help to Buy (FHTB) scheme that helps the military to buy their first property. They launched the scheme in 2014 to help enable people in the forces to buy a property even if they do not have a deposit.
The scheme allows forces personnel to borrow up to 50% of their salary interest free so that they can put it towards a deposit and any other costs such as solicitor’s fees. There is a maximum limit of £25,000, even if 50% of the annual salary is more than this amount.
Who is eligible for the scheme?
Any regular personnel who has completed the required length of service and has more than 6 months left to serve at the time. The scheme can be applied for using the online Joint Personnel Administration system.
Forces Help to Buy Scheme FAQs
How much can armed forces personnel borrow with the Help to Buy scheme?
The scheme allows armed forces personnel to borrow up to 50% of their annual income, with a maximum limit of £25,000.
Who can apply for Forces Help to Buy?
Personnel from the British army, navy and RAF are able to apply for the Forces Help to Buy scheme. The eligibility criteria includes that they must complete the required length of service and must have more than six months remaining on their length of service.
What can the Forces Help to Buy loan be used for?
The Forces Help to Buy loan can be used for a deposit on a property, as well as other costs such as estate agent fees and solicitor’s fees.
Is the Forces Help to Buy scheme interest-free?
Yes, the FHTB is an interest-free loan to support people in the armed forces to get onto the property ladder.
What type of properties can be bought using the Forces Help to Buy scheme?
The scheme is for buying a first-time home, moving home while on assignment or when the applicant’s family’s needs have changed.
How does the Forces Help to Buy process work?
The loan can be applied for online using the Joint Personnel Administration system. There is some additional information available on the intranet that will help with the application process. Applicants might also benefit from speaking to their Chain of Command to get advice on the application process.
The application process is fairly straightforward and it should take around 20 minutes to complete all of the required information. You will usually get a response in just a few hours after submitting the application. Once you have had approval of the loan, you can start the mortgage application process.
When do I start paying back the Forces Help to Buy loan?
There are a few different options available to start paying back the money:
- Straight away once you take the loan out.
- Six months after you have received the loan.
- In the final 10 years of service (for people in their early years of service).
What happens if I leave the forces after taking out the Forces Help to Buy loan?
The loan will still stay in place even if you leave the forces, however if you are given a resettlement grant, it is possible that the loan repayment will be taken out of your grant or final month’s salary.
Can ex-military purchase a home through the Forces Help to Buy Scheme?
No, the Forces Help to Buy scheme is only available to people who have at least six months of service remaining. However, there are other specialist mortgages and support available for ex-military.
The government’s Help to Buy Scheme may be a suitable option. This scheme enables consumers to buy a new build property. The scheme provides an equity loan from a Help to Buy agency and the loan will get paid in addition to the mortgage. The equity loan repayments will only start five years after the purchase of the property.
There are also specialist lenders who will approve mortgages for applicants who have bad credit, which could be another option for ex-military to buy their own property.
What affects Forces Help to Buy mortgage rates?
The Forces Help to Buy mortgage rates will be affected by exactly the same factors as any other mortgages. These factors are:
The more deposit you have, the better the interest rate you should be able to get. Lenders offer different mortgage deals depending on the LTV ratio (loan to value). For example, if you have a 20% deposit (80% loan to value), you should be able to get a lower interest rate than if you only have 10% deposit (90% loan to value). This is because there is less risk for the lender when there is a larger deposit.
If you use £25,000 from the FHTB scheme as a deposit, then this would be 10% deposit (90% LTV) on a £250,000 property or 20% deposit (80% LTV) on a £125,000 property. So, if you want to get the lowest interest rate possible, the deposit needs to be a larger percentage of the property value.
Income and outgoings
The amount that a lender will be prepared to lend will depend on income and outgoings. On a standard mortgage, lenders will usually lend around 4-4.5x a person’s salary. Historically, lenders would approve mortgages based on a person’s salary and credit rating, without taking outgoings fully into account.
Since mortgage regulations became stricter in 2014, there is more of a requirement for lenders to review an applicant’s outgoings. This includes pretty much every type of spending such as bills, loan repayments, food shopping, subscriptions and even money spent on socialising and dining out.
An applicant’s credit rating will also be an important factor in a lender’s decision of whether to approve a mortgage. People with poor credit ratings will often struggle to get a mortgage approved, or they may have to take out a mortgage with a significantly higher interest rate, as other lenders are not prepared to take on the risk.
People who have missed payments on bills or loan repayments will generally have a poor credit rating. The more missed payments there are and the more recent that they occurred, the bigger the impact on the credit rating. Anyone with a CCJ or bankruptcy on their credit file will generally struggle to get a standard mortgage approved and will need to use a specialist poor credit lender.
For military personnel with poor credit, specialist military mortgage lenders will provide greater flexibility around poor credit if it is due to their job. However, in some cases poor credit, CCJs and bankruptcy could still affect the ability to get a mortgage approved.
Mortgage lenders have age limits for applicants. 18 is the youngest that a person is able to get a mortgage in the UK and the maximum age varies depending on the mortgage lender. Most lenders will want to ensure that a homeowner will have paid their mortgage off by the time that they retire, so that they have the income to pay their mortgage each month.
Older applicants may still be approved for a mortgage but the lender will only allow it to be taken out over a shorter term. For example, a 55-year-old applicant could still be accepted for a mortgage but over a term of 14 years. This is just a sample age and mortgage term, there are lots of other possible age/term scenarios.
Some lenders may only approve a mortgage for an older applicant if they pay a higher interest rate.
The type of property can also affect the lender available to the applicant. This means that the type of property can also affect the interest rates available. For example, an unusual type of property would generally be considered as a higher risk than standard properties. The types of properties that could prove to be more difficult in terms of getting a mortgage include:
- Ex-local authority housing
- Properties constructed from concrete
- High-rise flats
- Studio flats
Properties that have unusual constructions might be harder to sell, which is one of the reasons lenders do not like to provide mortgages for certain types of property. In these cases, there may be a higher interest rate applied to compensate for the risk related to the property type.
What documents do I need to apply for a military mortgage?
The documents required for a military mortgage will be similar to applying for any other mortgage. You will need to provide a form of ID, proof of address, proof of income, bank statements and any other documents that the lender requests.
Most lenders will require at least 3 months’ of payslips to evidence income and 3-6 months of bank statements to review outgoings.
What should I do before applying for a mortgage?
It is a good idea to find out how much you are likely to be able to borrow, so that you know what price range of properties you should be looking at. If you put in an offer for a property and the mortgage amount is not approved, this will waste your time, as well as the estate agent’s and the property seller’s time.
Some estate agents will ask to see a Mortgage in Principle (MIP) which is written confirmation from a lender of how much they will lend you in principle. The amount in the MIP is not guaranteed, as when the lender performs the comprehensive checks, they may decide to offer less, or in some cases, they may offer more.
Speaking to a broker should help you to understand mortgage amount you are likely to be approved for with a specialist military mortgage lender.
How long does it take for the mortgage application?
The mortgage application process can take anywhere between usually 2 weeks to several months, depending on a number of factors.
The first step of the mortgage application process will usually be to talk to a mortgage adviser who will help with the application submission. Boon Brokers’ mortgage advice team can help to quickly find the best specialist military mortgage lender for your specific financial situation.
Using a broker can help you to save a considerable amount of money on interest, as they can usually access the lowest interest rates available. Over a mortgage term of 25 years, even a small difference in interest rate will make a significant difference in the amount that you pay back over the full term.
Once the lender receives your application, they will review the details and if they are happy with their initial review then they will arrange a property valuation. The lender will need to ensure that the property value matches the price that you are offering to pay for the property.
If you put an offer in for the property and the valuation is lower, there may be negative equity in the property. This means that if you defaulted on the mortgage and the lender repossessed the property and sold it, there is a risk that they might not get all of their money back.
Therefore, the valuation is a crucial part of the mortgage process. Any discrepancies between the valuation and the house price could result in the lender not being prepared to offer a mortgage.
If there is no issue with the valuation, the lender will then pass the application onto their underwriters who will perform checks across various risk factors. This will include a check on the credit file and if there are details that do not match up to the details provided in the application, this could also be a problem.
When the underwriters have performed their checks, if they are happy with the results, they will then provide a mortgage offer. The next stage will then be to arrange the completion of the property purchase, using solicitors to arrange the transfer of funds.
Military personnel can find it challenging to be approved for a mortgage due to the unique circumstances of life in service. While many lenders will not provide any flexibility around lending criteria for the armed forces, there are currently some specialist lenders who do. These lenders work specifically around the typical financial circumstances and living arrangements of servicemen and servicewomen.
The government’s Forces Help to Buy scheme has been introduced to help make getting a mortgage easier for military personnel. If you are looking for a military mortgage to buy your first property or move home, Boon Brokers can help you to find the right mortgage to suit your needs.
Contact our mortgage team today and we can help you to get started with your mortgage application and hopefully enable you to get onto the property ladder. Bon Brokers offers a fee -free, whole-of-market, mortgage advice and arrangement service.
Gerard is a co-founder and partner of Boon Brokers. Having studied many areas of financial services at the University of Leeds, and following completion of his CeMAP and CeRER qualifications, Gerard has acquired a vast knowledge of the mortgage, insurance and equity release industry.