The Government backed Forces Help To Buy Scheme (FHTB) recognises the service given by the Armed Forces and is a practical demonstration of gratitude.
The latest figures from the Ministry of Defence demonstrate the ongoing popularity and success of FHTB but Personnel need to be aware that although the scheme has been extended, the clock is ticking, with a deadline of 2018 looming on the horizon!
The FHTB scheme was introduced to enable members of the Military to borrow up to half their salary, interest free, to support them as they purchase their first home or move up the property ladder. The scheme has been especially popular amongst non-officers, with the latest figures from the Ministry of Defence (December 2016) confirming that 82% of payments were made to other ranks. This is an opportunity that many Personnel would be well advised not to miss!
The latest figures from the Ministry of Defence (MoD) from December 2016 demonstrate the ongoing popularity and success of FHTB.
In the month of December 2016:
- 300 first stage applications were received; that’s applications which pass initial eligibility checks.
- 222 second stage applications were received; that’s applications which pass detailed eligibility checks.
- In total, 323 payments were made to Service personnel.
The December 2016 figures contribute to numbers covering the scheme since its introduction in 2014:
- 19,585 First Stage FHTB applications have been received, with 11,867 of these applications having
proceeded to the second stage and payments made to around 9,700 applicants.
- The total value of payments is just under £147 million.
How FHTB works
- The scheme allows Service personnel to borrow an interest-free advance of up to 50% of their salary (to a limit of £25,000), which they can use towards a deposit on a property. This is then paid back over 10 years through their monthly salary.
- The FHTB amount is also available for extending existing homes due to a change in circumstances. Serving members of the regular Armed Forces are eligible for FHTB providing they meet certain criteria. Royal Navy or Royal Marines personnel must have been accepted onto trained strength. Army and RAF personnel must have completed two years’ Service from the date of enlistment and be on the trained strength, and have at least six months left to Serve.
- Personnel who have owned a home in the last 12 months that was within 50 miles of the home they plan to buy are unable to access the scheme, unless there are extenuating medical and family circumstances.
- Whilst the FHTB loan is interest free you will need to pay a small insurance premium, which will also be deducted from your wages every month. The monthly payment will be around £6.50 or less, based on how much you actually borrow under the scheme. This insurance policy will ensure that any outstanding loan will be entirely paid off should you either get a medical discharge or pass away while still Serving in the Military.
- Forces Help to Buy was designed to assist first-time buyers, or those who are moving home and cannot be used to pay off an existing mortgage. If you use the scheme, you’ll be expected to live in your new home unless you’re assigned elsewhere.
- You cannot use the loan just to enhance or expand your current house unless it is not appropriate for medical or other family reasons, then it is likely that you could get a FHTB loan.
- The remainder of your home purchase is covered by a mortgage loan from a lender such as a bank or building society.
- The outstanding balance will have to be paid off if you accept a loan under the new scheme but leave the Military before you have completed your repayment. Your terminal benefits can be used to help clear any outstanding loan, as confirmed by the Government.
- There may be instances where exceptions to the standard rules (and eligibility criteria) may be justifiable, especially where you have extenuating medical and personal circumstances. (Other government-backed housing schemes can be used together with Forces Help to Buy except the Help to Buy Mortgage Guarantee.)
You can get advice or help in finding a mortgage from a mortgage adviser, broker, lender or Independent Financial Adviser (IFA). They will be able to ascertain how much you can borrow depending on your personal circumstances.
Forces Help to Buy scheme: www.gov.uk/forces-help-to-buy
Find a Help to Buy agent: www.helptobuy.org.uk/equity-loan/find-helptobuy-agent
Find an Independent Financial Adviser (IFA): www.unbiased.co.uk