Battling to borrow: Mortgages for the military
Monday, 28 March 2011 2:59 PM
Working in the Armed Forces can mean moving around a lot at short notice. This can have repercussions on your credit rating, which in turn can make it very difficult to obtain a mortgage. Bob Bardsley considers the problems faced by military personnel when trying to buy a house, and steps you can take to secure finance and get on the property ladder.
Credit ratings for military personnel
When you're fighting for queen and country, your credit rating is the last thing you want to be worrying about. But Britain's military heroes face an unfortunate quirk of the system that means they could be refused a mortgage based, albeit indirectly, on the job they do.
Although credit ratings are designed to protect lenders and borrowers alike from entering into debts that cannot be repaid, they are based in part on time spent in the UK. That means some people in the military who are forced to move their whole family halfway across the world due to their work risk damaging their financial history in the process.
It's a problem that hasn't gone unnoticed: the Council of Mortgage Lenders (CML) has already told its members to take Armed Forces personnel's special circumstances into account when deciding whether to lend to them, including allowing them to let out their homes to tenants while they are away on duty.
The CML said: "Most lenders already offer this flexibility, but it is important for the particular housing and credit circumstances of services personnel to be understood."
Housing schemes for soldiers
Buying or renting a house is such an issue for the military that the Ministry of Defence runs special briefing sessions, called Housing - the Options, for service personnel who want to know more. Another line of briefings, Housing Solutions, encourages those in the services to work out while still in the military where they will live once they return to being civilians.
For those in the Armed Forces, Priority Status can help when trying to join affordable housing schemes that are open to the general public. The Ministry of Defence Referral Scheme is another way members of the military can get a head start when applying for such schemes.
On top of all of that, there's a magazine from the Joint Service Housing Advice Office called Housing Matters which looks at different regions and property problems on a month-by-month basis, reaching 10,000 Ministry of Defence personnel worldwide.
To find out more, check out the MoD's Affordable Housing leaflet.
Managing a mortgage when you're in the Armed Forces
One option that is available to Ministry of Defence personnel is the Long Service Advance of Pay scheme. This is basically a way of getting at earnings early in order to cover the lump sum of a deposit on a house – although it's important to remember the effect it will have on the family's income while catching back up on the pay period that has been taken early.
With house prices rising, though, and many lenders asking for larger deposits, it's certainly an interesting option for people who aren't keen on shared equity.
Additionally, Mortgage Life Insurance is a must. It can clear the entire outstanding debt on a property and make sure the family can stay in their home if the breadwinner dies. Due to the special nature of serving in the Armed Forces, it's worth checking with the insurer that deaths in the line of duty will be covered, but there are advisory services and insurers who specialise in dealing with members of the military – the Ministry of Defence's Financial Advice for the Service Community page lists just some of them.
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