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Don’t get shot down: Sourcing mortgages for military personnel

by: Chris Lloyd, associate director at Enness
  • 29/11/2017
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Don’t get shot down: Sourcing mortgages for military personnel
After being approached by several clients actively serving in the armed forces, Chris Lloyd continues his series of case studies by considering mortgages for military personnel.

There are nearly 150,000 personnel in the UK Armed Forces, including the Army, Navy and Royal Air Force.

While the military provides accommodation for its servicemen and women, there are many reasons individuals may want to own their own homes, either for their family’s stability or as a future investment upon leaving the military.

However, for those who are busy serving their country, finances are often the last thing on the agenda — and there are several factors related to being in the military that make securing a mortgage a challenge.

 

So, what are the problems personnel could face if life in the barracks is not for them?

Unfortunately, being in the military for a long stretch can negatively affect credit ratings, especially if your client has had to move frequently.

Being a first-time applicant having lived in barracks may mean the client struggles to show a credit history. The best approach here is to work with lenders who can provide bespoke underwriting, ensuring your client is not penalised because of their military service.

Another potential problem is they may have to face unforeseen circumstances, meaning they need to vacate a property they have bought. Fortunately, there are several lenders who have considered this aspect of military life and provisioned accordingly.

For example, one high street bank will allow a borrower to rent out their property for up to two years before changing to a buy-to-let mortgage. This is hugely beneficial for those who have been deployed.

 

Returning home

Another lender I know of will not charge additional interest rates when swapping to a buy-to-let, providing you can prove you’re a member of the British Armed Forces and have filled out their permission to let form.

On that note, securing a mortgage while deployed for a property to return home to can be a real challenge — a good broker can come in handy here. We regularly arrange mortgages in the UK for clients based abroad.

Some major lenders offer specialist mortgage features for those in the Armed Forces. For example, some lenders require two years’ proof of address to process an application.

Those in the Armed Forces cannot always provide this if their role has required them to relocate frequently, so one high street lender offers military personnel the freedom to use their British Army Postal Address.

 

Suitable mortgages

While there are not generally specialist military mortgage rates, there are certain types of mortgages which are likely to be more suitable for those in the military; tracker rates come with no early repayment charges (ERCs), for example, meaning personnel won’t be penalised should they need to move or change product.

When it comes to how much someone can borrow, this is ultimately like any other mortgage, and will be dependent on salary history.

As a clients works their way up through the ranks the Army offers huge potential for salary growth. While a Private can expect to earn under £20,000, a Brigadier can earn in excess of £100,000. If a client is earning a generous salary but has poor credit or limited history, a broker with good lender relationships could be a good starting point.

For those earlier on in their careers, there’s also a Forces Help to Buy (FHTB) scheme in place, which was intended to run for three years until 2018, but has now been extended for another year.

The scheme enables those in regular service to borrow up to 50% of their salary up to £25,000 to use as a deposit; most mainstream lenders back the scheme.

Insurance against death in the line of duty is also key, especially if family depends on the wage to make mortgage payments.

This is not always a standard inclusion, so discussing the options or talking to a bespoke insurance broker about appropriate life cover may be useful.

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