The Forces Help to Buy Scheme, also known as FHTB, is a Government scheme that aims to address the low rate of home ownership within the armed forces. Eligible applicants can borrow up to £25,000 to put towards a deposit or other costs associated with buying a home, such as solicitor or estate agent fees.
In short, the Armed Forces Help to Buy Scheme is:
- A loan of up to £25,000
- Paid back over 10 years or less
- Interest-free (though tax implications may apply)
- Used for various fees associated with buying a home
- Open to those in regular service
- Requires an insurance premium for the duration of the loan
In this blog, we explore eligibility, the application process and answer the common questions serving personnel may have.
Who can use the Armed Forces Help to Buy Scheme
The Help to Buy scheme for forces personnel isn’t open to everyone within the Army, Royal Navy or Air Force. Reservists, for example, are ineligible, as are members of the Military Provost Guard.
Instead, all regular personnel who match the following criteria can benefit from the scheme:
- Have completed the pre-requisite length of service
- Have more than six months left to serve at the time of application
- Meet the right medical categories
- Have not drawn any terminal benefits
- Will buy a property in the UK
- Has no outstanding Crown Debt
How much can be borrowed on the Forces Help to Buy scheme?
The amount made available to an applicant varies based on their annual salary. At present, there is a cap on lending at 50% of the salary to a maximum of £25,000. There is often an assumption that the FHTB scheme is a £25,000 loan. It isn’t. £25,000 would only be lent where you earn £50,000 or more.
How do I apply for the FHTB scheme?
All eligible personnel who wish to apply for the loan should use JPA through the self-service application for FHTB. A user guide to take applicants through the process is available. However, where personnel may have no permanent access to JPA, a JPA Form E035 may be used instead and forwarded to the DBS Military Personnel FHTB Section at least six weeks before the expected completion date on the property.
What properties can the Armed Forces Help to Buy scheme be used on?
You can use your FHTB loan on a wide range of properties, however there are some exemptions. The property you are buying must be for your own immediate occupation, or that of your immediate family, and must meet the following criteria:
- Standard residential properties
- Shared ownership homes
- Properties purchased for renovation or conversion
- Self-build properties, where land with outline planning permission is purchased, and the finished property will be immediately occupied.
Properties that do not qualify for FHTB
Some properties remain ineligible for the scheme. These include:
- Mobile homes, houseboats or caravans
- Buy-to-let properties
- Dedicated business properties or residential accommodation with integral business premises (such as a shop with an upstairs flat)
- Second properties (unless specific extenuating medical or family circumstances apply)
- Properties outside of the UK (except for those in the Republic of Ireland for serving personnel recruited there or with Irish parents)
The property must also be one on which an FCA authorised mortgage lender is willing to lend, even if a mortgage is not required, in which case, a surveyor’s valuation report confirming mortgage availability will be needed.
How is the Forces Help to Buy loan repaid?
The FHTB loan is repaid at 10% per year and taken directly from your pay in monthly instalments. How quickly repayment begins depends on how much service you have remaining.
- 10.5 or more years to serve: Repayment begins within six months of the loan being paid.
- More than 10 but less than 10.5 years to serve: Repayment begins immediately, spread over the remaining service.
- Less than 10 years to serve: Repayment begins immediately, with the outstanding balance recovered from your final salary if not cleared beforehand.
You can increase your monthly repayment at any time, but it cannot be reduced below the 10% per year minimum. Full or partial repayment is also permitted at any time, either by BACS or via a cheque.
During the duration of the loan, an FHTB insurance premium is also payable. This is an annual premium, paid monthly starting the month after you receive your loan. Its cost may change each year and is set as a proportion of the amount borrowed.
Can I get a mortgage with a Forces Help to Buy Loan?
The FHTB scheme is designed to work alongside a mortgage, helping towards the balance of the purchase price, including deposit, legal fees, surveyors, land registration and estate agent fees. However, it’s important to understand that approval for a Forces Help to Buy loan does not provide any guarantees that a lender will offer you a mortgage.
Lenders will treat your application in the same way they treat anyone else’s and will assess your wider financial situation, including any debt, credit history and affordability.
If you wanted to remortgage at a later date to raise additional cash, you would need to notify the DBS Mil Pers FHTB Section (the MOD department that administers the scheme) before taking any further advances against your home. The sum of your mortgage plus FHTB must not exceed the value of the property. If it does, the FHTB would have to be repaid in full. Forces Help to Buy loans cannot be used to act as security to obtain additional mortgage funding.
Could I let out a house bought with a Forces Help to Buy loan?
You might be able to let out the property you have bought with a Forces Help to Buy loan, but written approval is essential. Letting the home without permission will see interest added to the loan and a recovery of the outstanding balance in full.
Rules for letting vary based on how your property is designated.
Residence at work address (RWA)
If you are permanently assigned to a duty station more than 50 miles from your FHTB property, you may apply to your Commanding Officer for permission to let. The application must be supported by your CO and submitted to the DBS Mil Pers FHTB Section. Letting is not allowed to begin until written permission has been granted.
Selected place of residence (SPR)
If your property is designated as an SPR, you are expected to return to it at weekends and during periods of leave. Letting is not permitted during the initial assignment periods. However, it may be permitted in certain circumstances, such as if you are assigned overseas, your current assignment makes returning impractical, or your family circumstances have changed.
Where letting is approved, interest charges are applied at the HMRC rates on the outstanding FHTB balance.
Can I sell my FHTB home?
You can sell a home obtained through the Forces Help to Buy Scheme. However, if any of the loan is outstanding when you sell, you must inform DBS Mil Pers FHTB Section immediately and repay what is left.
Failing to report the sale or repay the balance is considered a breach of regulations and will result in interest being added to the balance from the date of the sale.
If you are selling the home due to reassignment, you might be able to transfer the outstanding balance to a qualifying property as long as it is purchased within six months of selling the original home.
What are the rules for joint ownership?
Two or more service personnel can each obtain an FHTB advance for a joint purchase of the same property. Each applicant must independently meet all eligibility criteria. One partner qualifying does not automatically qualify the other.
While two FHTB advances can be used for the same property, there is no guarantee a lender will accept this. Speaking to a mortgage broker is highly advisable.
Where both partners are serving, specific rules may apply around property designation as an RWA or SPR, and the regulations do not fully address what happens when one partner leaves the service while the loan remains outstanding. Clarification should be sought from DBS Mil Pers FHTB before committing to a joint purchase.
Can I be refused for the FHTB scheme?
Yes. Applications can be rejected. There are various reasons you could be refused the loan. These may include:
- Having fewer than six months of service remaining
- Not receiving approval from the CO
- Being under warning for discharge
- Having an outstanding Crown Debt
Are there any tax implications on a Forces Help to Buy loan?
Yes, and it’s worth noting them. Under ITEPA 2003 Section 180, an FHTB advance is classed by HMRC as a beneficial loan. This means that if the total amount outstanding on the loan, combined with any other concurrent beneficial loans, exceeds £10,000 at any point during the tax year, the difference becomes liable for income tax.
The amount liable to tax is based on the notional interest that would have been paid had the loan been taken from a commercial lender, using a rate set by the Treasury. Where applicable, this tax is normally collected by adjusting your tax code.
If you are unsure of how this could affect you, speak to a financial advisor for specially tailored advice that aligns with your situation.
What happens to the Armed Forces Help to Buy loan if I leave the service?
If you leave the Armed Forces whilst still owing money, it can be recovered in various ways, depending on your circumstances:
- Voluntary discharge: The outstanding balance must be paid upon leaving
- Premature discharge on disciplinary or administrative grounds: Recovery will be sought from the final pay, with any remaining balance converted to a Crown Debt accruing interest.
- Bankruptcy or insolvency: You must notify DBS Mil Pers FHTB Section immediately through your parent unit. The case will then be forwarded for consideration of either recovery or write-off.
- Death in service: Recovery will be handled through the FHTB insurance, meaning your estate will not be pursued for the remaining balance.
If any outstanding balance is converted to Crown Debt, it must be repaid in full before any future FHTB loan may be granted.
If you’re buying a home through the Forces Help to Buy Scheme, it’s also worth making sure your new property is properly protected. Trinity’s Buildings and Contents Insurance for serving personnel is designed with the Armed Forces in mind, providing cover that works around the realities of military life including built in kit insurance – whether you’re living in the property or posted elsewhere. Request a call back from the Trinity team today to find out how we can help.