Forces Help to Buy SchemeBy Claudia Foxcroft
If you are aiming to get on the property ladder and haven’t looked at the Forces Help to Buy scheme, it’s time you did. The scheme is specially designed to help members of the Armed Forces by giving them a genuine head start on that ﬁrst step.
Why do we hear so much about how difﬁcult it is to buy a house? What are the major barriers preventing people from getting on the property ladder? Well, although housing prices aren’t cheap – they haven’t been for at least a generation – assuming you can get a decent mortgage, repayments aren’t usually unaffordable since interest rates are currently quite reasonable. The problem is the step before that. The very ﬁrst step in fact: moving from rented or other accommodation to becoming a homeowner.
What stops people from buying?
For many would-be ﬁrst time buyers, the cost of rent is so high that it can prohibit them from saving for a decent deposit. In fact, such is the scale of the challenge that experts suggest that more and more people could ﬁnd themselves with a lifetime of rent ahead of them, rather than being able to own a property.
Furthermore, post-credit crunch ripples and uncertain market conditions since the European referendum have almost certainly caused the cost of living to rise, with the ﬁnal nail in the cofﬁn being that throughout all of this,
house prices continue to rise, widening the gap that people renting need to jump and meaning that it’s becoming more difﬁcult to acquire a mortgage loan to cover the cost of even a modest home.
Cynics have argued that spending habits, particularly of younger people are partly to blame – citing an inability to seriously apply themselves to saving money. Of course it doesn’t help that interest rates means that it’s barely worth keeping money in the bank, rather than under the mattress and this has been seen as a disincentive to put a little something away.
The major beneﬁt of the Forces Help to Buy scheme is that it 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 can be a game-changer for people scratching around for a decent deposit.
It’s also worth noting that the Scheme is interest-free and is paid back through salary over a 10 year period. This, of course, knocks spots off any deal you can get from a high street bank – who wouldn’t lend you money for a deposit anyway since taking out a personal loan to qualify for an even larger debt in the form of a mortgage is greatly frowned upon by lenders and can mean that you aren’t approved for a mortgage at all.
The FHTB scheme means that Service personnel have a better opportunity than many to own a property and put down real roots; a valuable reward for their Service.
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.
- FHTB is also available for extending existing homes due to a change in circumstances. Serving members of the regular Armed Forces are eligible for FHTB provided 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 perhaps if it is not appropriate for medical or other family reasons.
- 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 beneﬁ ts 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 justiﬁ able, 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.)