Military mortgages aren’t really any different to standard mortgages. You can choose from the same range of deals that a civilian has access to.
The main difference is how the lender looks at you.
Certain lenders have taken the time to understand the unique situation that armed forces personnel find themselves in. Moving around a lot will affect your credit rating and you may not have many regular utility bills to build up a good credit score.
By working with an experienced mortgage adviser, military personnel can gain access to these specialist lenders, allowing you to get on the property ladder or refinance an existing property.
Understanding armed forces mortgages
There aren’t any mortgage deals that are specifically for the military.
But there are mortgage lenders (and brokers) that welcome people in the armed forces because they understand and appreciate your situation and lifestyle.
So this is more down to knowledge and attitude.
They make allowances and offer flexible solutions, tailored to the challenges of a military way of life.
In practical terms this could mean making concessions for gaps in your credit history, caused by working overseas.
Or they could allow you to purchase a home in the UK while you are actively serving overseas.
Other benefits
Military personnel on active service can gain additional benefits from some lenders. You may not always need them but it’s good to work with a lender that understands the unique nature of life in the armed forces.
Renting out your home – If you’re stationed overseas then you may want to rent out your home. Normally this would require a buy to let mortgage or being charged a fee for a consent to let. Certain lenders will grant permission without these requirements.
Unoccupied property – If there’s a need for you to vacate your home for extended periods of time, lenders will understand this.
Apply from overseas – If you are deployed overseas you are still able to apply for a mortgage to buy a UK property.
Eligibility criteria
The basic mortgage eligibility criteria applies to all types of borrowers:
- Minimum age 18-21
- Good credit score
- At least a 5% deposit
- Low debt to income ratio
- Good affordability
There are certain areas where lenders can make exceptions for members of the armed forces.
Your credit score will be affected if you have moved address frequently, and within short periods of time. This is part of your job and certain lenders will be able to take this into account when assessing your situation.
If you are posted overseas then the Local Overseas Allowance (LOA) becomes payable. It can be possible to get some lenders to include this additional payment within your gross earnings figure.
Pop in a few contact details and a qualified broker will call you back when convenient.
Types of mortgage
You will have the full range of mortgages available to you. Although the specific choices will differ between lenders.
Residential
Residential mortgages are for the home that you live in. A purchase mortgage will allow you to buy a property and a remortgage switches an existing mortgage to a new lender.
Options are available for first time buyers, guarantor mortgages and JBSP mortgages.
Investment
Investment property mortgages would be for:
Interest rates
The actual rates will always depend on the lender but the main interest rate options are:
Fixed rate: Fixed interest rate mortgages are available in a range of different terms, usually between one and ten years. Once the fixed rate starts your monthly payments won’t be affected by interest rate changes.
Tracker rate: A tracker rate mortgage is a type of variable rate mortgage, which means that the interest rate you pay can go up or down in line with the Bank of England’s (BoE) base rate. Unlike fixed-rate mortgages, a tracker rate can change so the amount you pay each month could go up if interest rates rise.
Variable rate: Variable rate mortgages are linked to the lender’s Standard Variable Rate (SVR). The interest rate you pay will be set by your lender and won’t necessarily rise or fall in line with changes to the Bank of England Base Rate. Your repayments will change when the SVR changes.
Repayment methods
The repayment method is the way that you will pay the mortgage back. There are actually three different options but not all of these will be permitted by your lender.
- Repayment – The traditional capital and interest mortgage where you pay back some of the mortgage each month.
- Interest only – With an interest-only option you only pay the mortgage interest each month and nothing towards the capital sum.
- Part and part – A part and part mortgage is a combination of 1 & 2 above.
Mortgage term
The term is the number of years that your mortgage is setup for.
Traditionally, the standard mortgage term has been 25 years. With rising mortgage and housing costs borrowers are now choosing longer terms, such as 30 and even 40 years. These are sometimes called marathon mortgages.
The term will directly affect the monthly cost of a repayment mortgage, the longer the term, the lower the repayments.
How much can military personnel borrow
Lenders still use a multiple of your annual income to provide a rough maximum mortgage figure.
For an armed forces mortgage you will generally be able to borrow up to five times your annual income. This is using the before tax (gross) figure.
Let’s see how this works:
£30,000 gross salary x 5 = £150,000
£35,000 gross salary x 5 = £175,000
£40,000 gross salary x 5 = £200,000
£50,000 gross salary x 5 = £250,000
The lender will then look at your affordability. This involves analysing both your monthly income and your monthly expenditure. To see how you manage your money, and what surplus, if any, you may have.
The affordability assessment may mean that they offer a reduced mortgage amount.
This happens frequently where borrowers have car loans, credit card balances or other debts.
How much do mortgages cost?
The cost of a mortgage is affected by the loan size, the interest rate and the loan term.
You can use our mortgage calculator to accurately calculate the monthly repayments.
These pages may also be of interest:
Average Mortgage Payments: Understand what homeowners across the country are paying and how property location can affect your mortgage outlay.
Mortgage Repayments Guide: Learn more about the monthly cost of different mortgages, including repayment and interest only.
How much do you need to earn: We explain mortgage affordability and give a guide on how much you need to earn.
How to apply
To get the very best outcome we would recommend working with an independent mortgage broker who is experienced in military mortgages.
They will have access to over 100 lenders, from the whole mortgage market, and can find the lenders that offer flexible lending terms for armed forces personnel.
Your broker can arrange an agreement in principle, or AIP, which will provide a good idea about whether a specific lender will approve the mortgage you need.
They will then be able to help you complete the application forms and collate (and check) all of the necessary documents and paperwork.
There’s no need for you to spend hours trawling through lenders websites or making endless phone calls. Let your broker handle it.
How not to apply
It can be tempting to just go it alone and apply for a new mortgage direct with a lender.
And for some this works fine.
But there’s two potential issues:
- You may not have found the best deal. A broker searches over 100 lenders when they research your mortgage options, ensuring you get a competitive deal
- The lender may not offer the amount you need to borrow, based on your income. This is because each lender has a different way of assessing your financial situation.
If you apply once and then re-apply with a new lender because you’ve been rejected, this could lower your credit score and affect your ability to get a new mortgage or other types of credit.
Improve your chances of success
Getting yourself organised and ‘mortgage ready‘ before applying for a mortgage is one of the best things you can do.
Whether you are buying your first home or thinking of moving somewhere new, there are a number of ways that you can improve your situation, which will also speed up the mortgage process.
It’s really important to allow yourself enough time to gather everything together.
Credit status
Get a copy of your credit report. The report will show all sorts of credit related information and you need to make sure that it is all correct. Any errors need to be fixed.
Mortgage broker
Speak with a mortgage broker, they will be able to see how well you ‘fit’ a lenders criteria and can make practical suggestions and tips on how you can improve your situation.
Decision in principle (DIP)
Ask your mortgage adviser whether a Decision in Principle, or DIP, would be a good idea. Most first time buyers will benefit from one. A DIP or AIP will provide some extra confidence in your ability to borrow the size of mortgage you need.
Electoral roll
One factor that can greatly impact your mortgage application and creditworthiness is your presence on the Electoral Roll. The Electoral Register, is a comprehensive record of eligible voters in the United Kingdom. Am I on the Electoral Register?
Financial Associations
If you have previously applied for any type of credit with another person, the Credit Reference Agencies (CRA) will have ‘linked’ you to the other party. If an old or irrelevant financial association is still on your report, it is important to remove it.
Paperwork
Get your paperwork in order. The main documents needed are: Driving licence, Passport, Utility bills,
Last three/six payslips, Most recent P60, Bank statements, Proof of deposit
Pay your bills
on time. (always)
Don’t apply
for any more credit before or during the mortgage application process. This could seriously damage your chances of being approved.
Credit limits
Stay well within your credit limits and if possible, reduce any debts held on credit cards or store cards.
Mortgage broker
Contact an experienced mortgage broker. Oh, we said that already. Don’t forget!!
How a broker can help
The best way to find and compare deals is by using a qualified whole of market mortgage broker. An experienced broker will do the research on your behalf, finding your ideal mortgage from over 100 lenders.
They will understand your job, your pay structure and the lender’s that favour careers like yours.
As a member of the armed forces you may have struggled getting a mortgage in the past. Often these situations occur because you have been working overseas and have gaps in your credit history.
Not every lender is willing to bend the rules, even for those who defend our country and put their lives on the line.
But we can change that, by matching you to a broker who can offer an armed forces mortgage and all the benefits that comes with it.
Searching for your own mortgage is very time-consuming and can also be quite confusing. While some people are happy to do this themselves, others recognise the advantages of using a qualified broker.
- What is a whole of market mortgage broker?
- What does a mortgage broker do?
- Do mortgage brokers charge a fee?
- Why should you use a mortgage broker?
- Why would you use a mortgage broker instead of a bank?
- How do mortgage brokers get paid?
- Mortgage broker vs Bank: Which is better for you?
- What are the advantages of using a mortgage broker?
- Ten Reasons to Use a Mortgage Broker
Sadly not. The interest rates will be the same regardless of rank and position. In general, the mortgage deals on offer are available equally to military personnel and non-military.
The trick is finding a lender with the right attitude.
That’s fine. Our advisers will understand this and can work around any time differences and liaise via phone and messages/email.
If you’ve been turned down for a mortgage it’s important to find out why. It could be as simple as failing the initial credit search because your credit score is so low. If this is related to moving around a lot then a more amenable lender needs to be found.
The best thing to do is:
- Get a copy of your credit report
- Give it to a mortgage adviser to investigate
The wrong thing to do is:
- Keep applying to different lenders
In theory yes.
If you are actively employed by the British Armed Forces (Royal Navy, British Army, Royal Air Force) then you should be eligible.
A mortgage broker will be able to takeaway much of the drudgery and time needed to research a mortgage suitable for a soldier.
Then they will help with all of the paperwork and liaise with the lender while it is being processed.
Yes, mortgages are available for first-time buyers.
We work with one of the largest and most experienced independent mortgage brokers in the UK.
They have been experts in the mortgage industry for over 45 years, so they understand the challenges that clients can face when looking for a mortgage.
With qualified advisers based across the UK, they have the experience and expertise to help guide you through the complex process of buying a house, remortgaging, raising bridging finance or investing in the property market.
Fully FCA regulated, they have more expertise across more lending solutions than any other broker and have specialist teams in place to work with clients through every stage of their journey.
To get started please call us on 0330 030 5050 so we can match you to a specialist broker, or use the form below.
