If, after purchasing a property, subsequent assignments are more than 50 miles from the purchased home, personnel will again be entitled to SLA and SFA (and their substitute equivalents). However, if any subsequent assignment is within 50 miles of the purchased property, entitlement to SLA and SFA will again be relinquished and the individual will be expected to live in their own property.
Letting the property on a posting in the UK or overseas
FHTB loans may not be used to buy a second property in any circumstances, including ‘buy- to-lets’. The home purchased must be occupied, in the first instance, by personnel and/or their immediate family. However, in subsequent postings where personnel have their entitlement to SFA reinstated, personnel can apply to their Commanding Officer and mortgage lender to let out the property. In this case, as with LSAP, interest rates will be applied to the loan (the rate is set annually, but is currently 4%). However, if a subsequent assignment is within 50 miles of the property, the individual will be expected to live in it and entitlement to SFA and SLA will be relinquished.
Tax Implications Forces Help to Buy is considered to be a beneficial loan under HMRC regulations and will attract taxation on the ‘benefit’ of not paying interest on loans over £10,000. An individual who borrows under £10,000 will not be liable for tax and so the FHTB loan is interest free. However, if they borrow more than £10,000, they will be liable for tax on the full FHTB loan amount. In addition, if the service person incurred letting charges during the financial year, the loan does not remain interest free and HMRC will calculate the tax liability based on all income and issue a tax demand to the Service Person. The HMRC website gives more information.
Support for movers
Existing arrangements for supporting those who are assigned will remain in place. The Refund of Legal Expenses contributes to the cost of buying and selling a home when moving to a property at a new work place. JSP752 sets out the circumstances in which this can be claimed. FHTB loans can be moved to a new home, so long as the rules of the scheme continue to be met.
Insurance
Those who take out a ‘Forces Help to Buy’ loan will be required to make a modest annual insurance payment, which will be taken directly from salary. This will enable the balance of the loan to be repaid in full
www.raf-ff.org.uk
should an applicant die or be medically discharged from service. For the LSAP scheme this currently costs 30p for every £100 loaned, but is reassessed annually based on the level of claim in the previous year. As a guide, based on current charges, a loan of £25,000 would incur an insurance premium of around £75 per year (significantly less than equivalent insurance on the commercial market). Payment of this Insurance Premium is mandatory.
Personnel with a Long Service Advance of Pay (LSAP) arrangement Personnel who have an existing LSAP loan are eligible to apply for a new FHTB loan when moving home. Part of the FHTB loan will be used to ‘buy out’ the remaining LSAP balance, so that you are a member of just one scheme (the total loan cap of £25,000 will still apply). However, those with an LSAP loan cannot apply for a FHTB loan to fund a house purchase which has already been completed, only for a new move of home.
Personnel subject to Tranche 4 redundancy The ‘Forces Help to Buy’ scheme for Tranche 4 (FHTB T4) is aimed at Service Personnel who are leaving the Armed Forces under the Tranche 4 redundancy programme, either as an applicant or non-applicant, with no further eligibility restrictions.
SOLD
It allows these personnel to apply for a short- term loan of up to 90% of their redundancy lump sum or £68,000, whichever is the lower. The loan amount will automatically be recovered from their redundancy lump sum when they leave the Service.
Personnel will not be able to apply until written notification of redundancy is received. This scheme will therefore launch on 12 Jun 14.
The FHTB T4 loan can be used to purchase a home within the UK or Republic of Ireland, or, alternatively, used to carry out building work on property those leaving through Tranche 4 redundancy already own (where they meet the qualifying criteria as set out in the FHTB T4 scheme rules).
Service Personnel who already have a Long Service Advance of Pay (LSAP) loan can still apply for a FHTB T4 loan. The outstanding LSAP amount will be consolidated into one FHTB T4 loan but will not exceed the maximum limit.
Short-Term loans It is important to note that approval for a
FHTB T4 loan does not necessarily guarantee that Service Personnel will be advanced a mortgage by a mortgage lender. The potential to secure a mortgage offer is based on a mortgage lender’s assessment of individual personal circumstances and their ability to make repayments. Therefore, the likelihood of securing a mortgage offer may be increased if Service Personnel can provide evidence of affordability, such as a firm offer of employment after leaving the Service, or alternative income, for example, from a spouse.
Eligibility and Scheme Rules The FHTB T4 scheme will run under the broad intent of the general FHTB scheme, the details of which were published in DIB 07/14, although there are fewer restrictions on how the loan can be used. See Annex A for the FHTB T4 scheme eligibility criteria and rules.
JSP 464 which contains details of both the general FHTB and the specific FHTB T4 scheme has been published on 20 Feb and can be found on the intranet.
How to apply
Those leaving through Tranche 4 redundancy will be sent FHTB T4 application forms as part of the redundancy notification process. Application forms will also be available on the JPA forms page, but must be printed and posted to SPVA.
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