Anthony Beachey
The Forces Help to Buy scheme (FHTB) is a government initiative designed to support homeownership and also to enable self-building among eligible service people from the UK Armed Forces.
It can be used to buy a first home, move or, in some cases, extend an existing property. The scheme consists of a maximum interest-free loan of £25,000 repayable over a period of up to 10 years.
What is the Forces Help to Buy Scheme?
The FHTB allows eligible members of the Armed Forces to get on the property ladder as a first-time buyer or move to another property when on assignment. FHTB can, on occasion, also be used to extend a property, for example, to meet the needs of a growing family.
How does the Forces Help to Buy scheme work?
You can borrow up to 50% of your annual salary, up to a maximum of £25,000, interest-free. You could, for example, borrow £15,000 if you’re on a £30,000 salary and meet the eligibility requirements. The loan can be repaid over a period of up to 10 years.
As an example: the monthly repayment if you borrowed £12,000 over 10 years would be £100.
Many major mortgage lenders will accept the FHTB loan as the deposit for a new home.
To be eligible, the property must be purchased for your own use or that of your immediate family. Exceptions may be made, however, if you are posted overseas at the time of purchase.
The scheme should not be used for the purchase of buy-to-let properties. However, you can let out an FHTB home once you’ve lived in it if you need to permanently move for a new assignment that requires you to work more than 50 miles away. You would need to get sign-off from your commanding officer, however, and once your home is let, interest on your loan will start being charged at a rate set by HMRC.
Who is eligible for the scheme?
All regular service personnel are eligible, provided that they:
- Have completed 12 months’ service from the date of enlistment and have completed Phase 1 training.
- Are not a reservist or member of the Military Provost Guard Service
- Have more than six months left to serve at the time they apply
- Meet the right medical categories.
Exceptions may be made on medical or personal grounds.
How to apply for the Forces Help to Buy Scheme
First, you need to find a property to buy and then go through the usual process of getting a mortgage and engaging a solicitor.
You will need to apply for the FHTB scheme at least six weeks before completing your purchase. This can be done using the Joint Personnel Administration (JPA) system used by the British Armed Forces. If you’re extending your home or moving house, you still need to apply via the JPA system.
In the event you don’t have access to the JPA system, applicants can complete JPA Form EO35 instead and forward it to DBS Military Personnel.
It takes around four weeks to process applications.
What are the tax implications of the scheme?
HMRC deems Forces Help to Buy to be a ‘beneficial loan’ (a benefit gained by employment) and will therefore tax the loan if it, and all other forms of beneficial loan you receive in that tax year, exceeds £10,000.
Pros and cons of FHTB
The Forces Help to Buy scheme can offer several benefits:
- Flexibility. FHTB can be used for buying a first home, moving house or extending a property. It can even be used for self-build projects.
- The loan is interest-free.
- Straightforward application process.
The scheme may also offer some disadvantages to consider:
- You can only borrow up to £25,000, for up to 10 years.
- There are strict criteria on who can borrow, and the money can only be used for specific purposes. You need to be in regular service, for example, so members of the Army Reserve cannot apply.
Alternative schemes and discounts
Many mortgage providers offer products that can work in conjunction with Forces Help to Buy.
There are also specialist mortgage brokers who work with members of the military and retired personnel to obtain mortgages and other financial products. If you’re planning to use a mortgage broker, make sure you disclose the use of FHTB at the outset and check that they inform potential mortgage providers.
Specialist brokers can also help locate lenders with specialist knowledge of the requirements of military personnel and can provide access to more flexible and unique underwriting criteria for military mortgages. These lenders can help military personnel:
- who are stationed abroad purchase in the UK
- rent out their property on a standard residential mortgage
- leave the property unoccupied
- purchase overseas
» MORE: All about mortgage advice
Can I leave the military after receiving an FHTB?
You can leave the military after receiving an FHTB loan, but the outstanding balance will be deducted automatically from any terminal benefits, such as resettlement grants, which you’re entitled to receive.
If possible, any outstanding balance should be paid before the end of your military service. If you aren’t able to do this, you’ll have to continue making the monthly repayments once you’ve left the military.
Can you use FHTB with shared ownership?
You can use FHTB alongside the standard Shared Ownership scheme when buying a property. If you and your partner are both in the military, you can each use an FHTB loan to buy a property together.
» MORE: Current mortgage rates
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