Martyn Barberry from Ideal Home Loans takes some time to explain Armed Forces Help to Buy.
So what makes you the best person to tell us about Armed Forces Help to Buy?
So I was actually in the Armed Forces myself. I served throughout the 80s in the Army, some glorious places like ceremonial duties in London through to Northern Ireland and Germany. I made a couple of trips out to Hong Kong and Cyprus. I spent the last six years going out to the BATUS (British Army Training Unit Suffield), BATUK (British Army Training Unit Kenya), BFC (Cyprus) and BFG (Germany), while we were out there delivering financial education briefings to the officers and serving personnel.
How does the forces help to buy work?
The Forces Help to Buy scheme came about in 2014. It replaced something called LSAP Long Service Advance of Pay, which was geared at just giving you £8,500.
The armed forces help to buy scheme is a scheme that will give you up to 50% of your salary as an interest free loan. There are some caveats in that it’s capped at £25,000. So if you’re a high ranking officer or senior NCO on more than £50,000 a year, your cap will be £25,000. Essentially what happens is the MOD will give you an interest free loan.
It’s repayable for their calculations over 10 years, so 120 months. So they will literally take the amount you borrow and divide it by 120. If I was to borrow £10,000 on the scheme, the monthly payment would be £80 which would be deducted from my wages at source and there is no interest charged on the loan at all.
Who can use the Scheme?
So the scheme is available to all officers and other ranks. The couple of rules that are in there that you have to have served a minimum of two years before you can apply for the scheme and you must have six months left on your engagement to run to be able to apply.
There is some other small print, but we would talk to you about that on an individual applicant by applicant basis.
How much can you borrow?
As I said earlier, you can borrow up to £25,000, but essentially it’s 50% of your salary. So if you are a junior NCO and on £25,000 a year, then you will be able to borrow a maximum of £12,500.
How long does the application process take?
We’ve had some examples of applicants where it’s gone through very quickly and we’ve had other applicants where it’s taken a little bit longer. You have to get it signed off by your CoC (chain of command). It then goes through Glasgow pay and records and then to Gosport.
Can it be used for shared ownership?
Yes. So essentially, it’s designed for you to buy your own first property. So it’s usable with all the other government schemes that are available. So you can have a shared equity loan. You can also use the help to buy scheme that is available on new build properties, and you can use the military scheme as well. So it’s not a case of can I use one or the other? You can use the government schemes as well as the forces help to buy scheme.
How is affordability calculated?
With regards to affordability, when we do a mortgage application with the forces Help to Buy Scheme, lenders would ask us to simply add in the monthly repayment that the MOD are going to charge for the interest free loan on the affordability section of a mortgage application form. So in the example I previously used, if I someone was getting £10,000 that figure would be £80 per month. Then us as the mortgage brokers would input the fact that you’ve got a loan running for ten years and you’re going to be paying £80 a month and the lender will then take that extra £80 a month into their affordability calculations.
Is the Forces Help to Buy scheme only available for new builds?
No, the Help to Buy Scheme is available for all properties, if it’s going to be a property that you’re going to buy yourself to live in and it’s your first home. So if you already own a property, unfortunately, you can’t then use the help to buy scheme to buy a second property. But essentially, it’s for new builds. It’s for standard residential properties. It doesn’t have to be a brand new building nearby.
Is there a renew date in mind for the Forces Help to Buy Scheme?
Question asked 26th August 2020
The scheme was recently extended and it’s been extended to December 2022. We’ve certainly got some time to get applications in. Obviously the only push that we’ve really got at the moment, of course, is that the government has put a freeze on stamp duty until March next year. Those people that are taking advantage of the scheme now, get the added advantage as well.
How do you repay the loan?
It comes out of your wages directly. A lot of things when serving in the forces get deducted from wages at source. Things like accommodation: whether you’re single living in an SLA, SFA, or whether you’re living in a married quarter “rent” as we term it in civvy street is deducted from your pay source, as are some of your bills. Everything’s deducted from your wages before you get it paid into your bank account.
Do I have to be posted in the UK to apply?
No, it doesn’t matter where you are posted around the world. Funnily enough, I was dealing with a guy late last night who was in Canada. First thing this morning, bearing in mind that two hours ahead of us, I took a call from a guy who is serving in Cyprus. So it doesn’t matter where you’re posted, you can apply for the money to buy your house. You can get the procedure underway relatively quickly. It’s all held on JPA. So that’s that the personal administration system they can log on to and get details for it.
Is there a lot of paperwork?
Like everything in the military, there is paperwork that needs to be completed and it’s something that we can certainly help with over the telephone or FaceTime, WhatsApp, whatever, we can go through the best routes to go. You can also go to your admin office. So your RAO or RAWO somebody in there will be able to help with the documentation if you are stuck with it. But if not, we can certainly deal with that with you over the phone.
Any other bits of advice?
I purchased my first property while I was a full screw, so when I was a corporal. I never regretted the fact that I didn’t spend twenty two years of my career living in SSFA or SFA (forces accommodation) to then come out and suddenly think “Right, Where am I going to live?” The sooner you can get on that housing ladder, the better.