What is a military mortgage?

A military mortgage, also known as an Armed Forces mortgage, is a specialised type of home loan designed specifically for serving members of the British Armed Forces, veterans, and in some cases, Ministry of Defence (MOD) civilians. These mortgages are tailored to meet the unique needs and circumstances of military personnel, taking into account their particular lifestyle and career demands.

Key Features of Military Mortgages

1. Flexibility for Postings and Deployments: Military mortgages often come with added flexibility to accommodate frequent postings and deployments. This may include options to let out the property or put the mortgage on hold during overseas assignments.
2. Acceptance of Military Allowances: Many lenders offering military mortgages will consider various military allowances as part of the borrower’s income when assessing affordability. This can include Commitment Bonus and Local Overseas Allowance (LOA).
3. Special Rates and Deals: Some lenders offer exclusive rates or deals for Armed Forces personnel, which may include lower interest rates or reduced fees.
4. Consideration of Short-Term Contracts: Military mortgages often take into account the nature of short-term contracts common in the Armed Forces, which might be viewed less favourably by standard mortgage lenders.
5. Options for Those Living in Service Accommodation: Some military mortgage products cater to those currently living in Service accommodation, allowing them to purchase a property for their future use or as an investment.

Who is Eligible for a Military Mortgage?

Eligibility for a military mortgage typically includes:

• Serving members of the British Army, Royal Navy, Royal Air Force, or Royal Marines
• Veterans who have left the Armed Forces within a specified timeframe (often within the last 2-5 years)
• Reservists (eligibility may vary between lenders)
• MOD civilians (some lenders extend military mortgage options to this group)

It’s important to note that eligibility criteria can vary between lenders, which is why seeking advice from a specialist mortgage adviser is crucial.

How Do Military Mortgages Differ from Standard Mortgages?

While military mortgages share many similarities with standard mortgages, there are several key differences:

1. Understanding of Military Life: Lenders offering military mortgages have a deeper understanding of the unique aspects of military life, such as frequent relocations and deployments.
2. Specialised Underwriting: The underwriting process for military mortgages often takes into account factors specific to military service, such as deployment bonuses or the potential for career progression.
3. Flexibility: Military mortgages may offer more flexibility in terms of payment holidays, the ability to let out the property, or options to port the mortgage to a new property if relocated.
4. Consideration of Military Benefits: When assessing affordability, lenders may include military-specific benefits and allowances that standard mortgage lenders might not consider.

Forces Help to Buy Scheme

An important consideration for military personnel looking to purchase a property is the Forces Help to Buy (FHTB) scheme. Introduced in 2014, this Ministry of Defence initiative aims to help servicemen and servicewomen get onto the property ladder. Here’s what you need to know:

1. Loan Amount: The scheme allows eligible personnel to borrow up to 50% of their annual salary (capped at £25,000), interest-free, to use towards a deposit and other costs associated with buying a home.
2. Repayment: The loan is typically repaid over 10 years through monthly payments deducted from your salary.
3. Eligibility: To be eligible, you must be in regular service, have completed the required length of service, have more than 6 months left to serve at the time of application, and meet the right medical categories.
4. Usage: The loan can be used for a deposit, legal fees, estate agent’s fees, and other costs associated with buying a home.
5. Property Requirements: The property must be for your own immediate occupation or that of your immediate family.
6. Interaction with Military Mortgages: Many lenders offering military mortgages are familiar with the FHTB scheme and can factor this into your mortgage application.

It’s important to note that the FHTB scheme is separate from a mortgage, but can be used in conjunction with one. A specialist mortgage adviser can help you understand how to best utilise this scheme alongside a military mortgage, potentially allowing you to access better mortgage rates or borrow a larger amount. They can also guide you through the application process for both the FHTB scheme and your mortgage, ensuring you make the most of the benefits available to you as a member of the Armed Forces.

Remember, while the FHTB scheme can be a valuable resource, it’s crucial to consider your long-term financial situation and ability to repay both the FHTB loan and your mortgage. Always seek professional advice to ensure you’re making the best decision for your circumstances.

The Importance of Seeking Advice from a Mortgage Adviser

Given the complexities of military mortgages and the unique circumstances of each applicant, it’s highly recommended to seek advice from a specialist mortgage adviser. Here’s why:

1. Expert Knowledge: A mortgage adviser specialising in military mortgages will have in-depth knowledge of the products available and the specific needs of Armed Forces personnel.
2. Access to Exclusive Deals: Some military mortgage products may only be available through mortgage advisers and not directly from lenders.
3. Understanding of Military Pay and Allowances: A specialist adviser will know how to present your income and allowances in the most favourable light to lenders.
4. Navigating Complex Situations: If you have a unique situation, such as being posted overseas or living in Service accommodation, an adviser can help you find the most suitable mortgage option.
5. Time-Saving: A mortgage adviser can save you significant time by researching and comparing different mortgage products on your behalf.
6. Ongoing Support: A good mortgage adviser will provide support not just during the application process, but throughout the life of your mortgage.

The Application Process for a Military Mortgage

The application process for a military mortgage is similar to that of a standard mortgage, but with a few additional considerations:

1. Initial Consultation: Meet with a specialist mortgage adviser to discuss your circumstances, needs, and eligibility.
2. Documentation: In addition to standard financial documents, you may need to provide military-specific documentation such as your MOD Form 90 (identification and pay details) and details of any upcoming postings or deployments.
3. Affordability Assessment: The lender will assess your ability to repay the mortgage, taking into account your basic pay, any relevant allowances, and potential career progression.
4. Property Valuation: As with standard mortgages, the property you wish to purchase will need to be valued.
5. Mortgage Offer: If your application is successful, the lender will issue a mortgage offer detailing the terms and conditions of the loan.
6. Completion: Once all legal work is finalised, the mortgage funds will be released, and you can complete the purchase of your property.

Challenges and Considerations for Military Personnel

While military mortgages offer many benefits, there are some challenges and considerations that Armed Forces personnel should be aware of:

1. Deployment and Relocation: Frequent moves can make it difficult to build up equity in a property. Discuss options with your mortgage adviser for managing your mortgage during deployments or if you’re posted to a new location.
2. Career Uncertainty: The nature of military careers can sometimes lead to uncertainty about long-term postings or potential redundancy. Look for mortgages that offer flexibility in case your circumstances change.
3. Credit History: Frequent relocations can sometimes impact credit scores. If this is a concern, a specialist mortgage adviser can help you find lenders who understand these unique circumstances.
4. Overseas Postings: If you’re posted overseas, you may need to consider letting out your property. Ensure your mortgage terms allow for this, or consider a “consent to let” agreement.
5. Armed Forces Help to Buy Scheme: This government scheme can provide a loan to help with your deposit. A mortgage adviser can help you understand how this might interact with your mortgage application.

Future-Proofing Your Military Mortgage

When considering a military mortgage, it’s important to think about your long-term plans:

1. Career Plans: Consider how long you plan to remain in the Armed Forces and how this might affect your mortgage needs.
2. Resettlement: If you’re nearing the end of your service, think about where you might want to settle and how this could impact your property choices.
3. Pension Considerations: Military pensions can be complex. A specialist mortgage adviser can help you understand how your pension might affect your long-term mortgage affordability.
4. Insurance: Consider life insurance and income protection that cater specifically to military personnel, as standard policies may have exclusions for active service.

Conclusion

A military mortgage can be an excellent option for Armed Forces personnel looking to step onto the property ladder or move home. These specialised mortgage products offer unique features and flexibilities that cater to the distinctive lifestyle and career patterns of those serving in the military.

However, navigating the world of military mortgages can be complex, with various lenders offering different products and terms. This is why seeking advice from a specialist mortgage adviser is crucial. They can provide expert guidance tailored to your individual circumstances, helping you find the most suitable mortgage product and supporting you through the application process.

Remember, your home may be repossessed if you do not keep up repayments on your mortgage. Always ensure you fully understand the terms and conditions of any financial product before committing.

By taking advantage of the specialised options available and seeking professional advice from mortgage advisers for military personnel, members of the Armed Forces can make informed decisions about their home ownership journey, securing a stable foundation for their future while serving their country.