Affordability

What you can afford to buy is usually dependent on your income. Mortgage lenders place strong emphasis on stable, regular income when assessing affordability. If you’re planning to buy, it’s often advisable to do so while your income is steady, rather than relying on a lump sum at the end of your service. Securing a mortgage can be more challenging when transitioning into new employment, due to uncertainty around income.

A bank or building society typically lends a maximum of four-and-a-half times your annual salary for a mortgage. For example, if you earn £30,000 a year, you might be offered a mortgage of £135,000.

If you are buying with someone else, then it’s four and a half times your combined salary.

For example, a combined salary of £60,000, will bring your potential mortgage offer up to £270,000.

This calculation will help you to identify what type of property you can consider buying based on its price.

You’ll be required to pay a deposit when applying for a mortgage. This is a percentage of the value of the property.

When saving for a deposit, you should shop around for high interest savings accounts or high interest Cash ISAs that can help you reach your goal more quickly. In a Cash ISA, your money is protected from tax, so any interest that you earn on your savings won’t be taxed as income.

For some service personnel, you may have access to Forces Help to Buy. Forces Help to Buy is intended to help you purchase a property that will be your main residence. It can’t be used for buy-to-let properties and cannot be combined with other government Help to Buy schemes.

This scheme allows eligible personnel to borrow up to 50% of their annual salary, capped at £25,000, as an interest-free loan, to help with a deposit and associated costs. However, you’ll still need to meet lender affordability checks carried out by your chosen mortgage provider.

To be eligible for Forces Help to Buy, you must generally:

• have completed the required minimum length of service, usually two years
• be regular service personnel (not a reservist or part of the Military Provost Guard Service)
• have more than six months left to serve at the time of application
• meet the required medical categories

There may be exceptions in certain personal or medical circumstances.

It’s also important to note that you cannot leave the armed forces and retain the Forces Help to Buy loan. Normally, the outstanding balance must be repaid on discharge.

Leaving the armed forces before your Forces Help to Buy loan is fully repaid can have significant financial consequences. Any outstanding balance becomes immediately repayable, which may place pressure on your finances during transition to civilian life. In certain circumstances, if the loan cannot be repaid immediately, it may be converted into Crown debt, money owed to HMRC.

This can affect your access to other financial products or benefits. For example, outstanding debt may impact your credit profile, which in turn could affect your ability to remortgage, secure further borrowing, or access certain civilian support schemes.

If you are eligible for a resettlement grant, this may help you repay some or all of the outstanding amount, but it does not automatically clear the loan.

Careful financial planning before leaving service is essential to ensure you can meet repayment obligations without affecting your long-term financial stability. For full details and to check your eligibility, refer to the relevant guidance on JPA.

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The size of your deposit will impact the mortgage you are offered and your monthly repayments. For this reason, the loan-to-value ratio, or LTV, is an important figure to be aware of when purchasing a property. It’s based on the amount you pay as a deposit, represented as a percentage of the total value of the property. If you put down a 20% deposit, then your LTV is the remaining 80% of the property’s value.

A higher LTV, i.e. a smaller deposit, generally means a higher interest rate. This is due to the increased risk that you may fall behind with mortgage repayments or default. If a lender has to repossess the home, they may not get back what they lent you for the initial purchase.

In general, the lower the loan-to-value ratio or the higher your deposit, the better the rate of interest you’ll pay on your mortgage. Mortgages above 90% LTV do exist, but they may be harder to obtain and carry higher interest rates or special conditions.

Certain lenders, especially for first-time buyers or those under government-backed schemes, may allow as little as 5% deposit. Some schemes offer first-time buyers the ability to buy a home for an amount below market value, or on another special deal.

A first-time buyer is someone who has never owned a property, even if it was bought for them. There are savings or investment accounts designed to help you buy your first home. These may come with government bonuses, but also some restrictions. Some of these schemes apply to England only, and many of them come with property price caps.

If you’re struggling to put together a large deposit, look on the gov.uk website for schemes that can help you. You will still need to prove you can afford the mortgage repayments.

You may have also heard of shared ownership. This is a type of housing scheme designed to make buying a home more affordable, especially for first-time buyers. It helps people get onto the housing ladder with a smaller deposit and mortgage.

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Military personnel are often given priority access to government-funded Shared Ownership schemes. Where there is high demand and limited supply, priority may be extended to serving members and former armed forces personnel who have been discharged within the last two years, so it’s worth checking if you’re eligible.

Instead of buying 100% of a property, you buy a share, usually between 10% and 75%, and pay rent on the remaining share to a housing association or developer. The rent on the share that you don’t own is usually subsidised, but may rise over time. You may also pay service charges for maintenance, particularly in flats.

Your monthly repayment might be similar to those with 100%  mortgage, but shared ownership lowers the deposit needed, making home ownership more accessible.

If you’re buying a 25% share of a £300,000 home, the value of your share will be £75,000. The deposit is usually calculated between 5% and 15% of the share that you’re buying. If a 5% deposit is required, you would need to put down a deposit of £3750.

You will then need a mortgage for the rest of your share – the remaining £71,250.

On a repayment mortgage at 4% interest, your monthly repayment would be £356. You would still need to pay rent on the other 75% of the property that you don’t own. Rent is often calculated as around 3% of the unsold value per year. In this case, this will be around an additional £550 in rent on top of the mortgage payment.

Usually there’s flexibility to increase your share later. You can buy additional shares in chunks until you own 100% of the property. At that point, you would stop paying any rent.

Watch out for conditions on any scheme you go for. For example, does it need to be a new build home or previously purchased with the same scheme? If it is to be a stepping stone, then checking the rules around selling will be important.

There are often restrictions around the amount you earn, your age and whether you’re a first-time buyer. These restrictions often apply when exiting too, so you might only be able to sell to someone eligible for the same scheme.

Local councils can set eligibility criteria, and they often use this to prioritise key workers. The criteria for support can change, so always check the official gov.uk website or speak to a mortgage adviser for up-to-date information.

Most mortgage lenders accept family gifts towards your deposit. Lenders usually require a gifted deposit letter from your family member. This is a legal declaration confirming that the money is a gift, not a loan, and that they have no legal interest in the property.

They will also need to provide proof of ID and a bank statement showing the source of the funds. Some lenders may ask for a signed solicitor’s letter too. Be aware that large, unexplained gifts can trigger anti-money laundering checks, which could delay the application.

If the gift is a loan, it must be declared. This can affect affordability, and you might not be able to borrow as much, as paying this back to your family is an addition to your outgoings.

Guarantor mortgages are another option These involve someone else, usually a parent, agreeing to take responsibility for repayments if you can’t make them.

However, guarantor mortgages are becoming less common because many lenders prefer ‘joint borrower sole proprietor’, or JBSP, mortgages. These are an arrangement where multiple people take out a mortgage loan but only one person is listed as the legal owner of the property.

It allows lenders to assess all borrowers’ incomes while all borrowers are jointly responsible for repayments. This can improve affordability and access to competitive mortgage rates.

Multiple buyers can pool their savings to reach the required deposit more quickly. Combined applications increase the combined income, allowing buyers to borrow more money. A larger deposit or higher combined income might also give access to a wider range of mortgage deals with low interest rates.

If you’re buying with someone who you’re not married to, make sure you have a clear agreement in place outlining the share of ownership and exit agreement. This will help you avoid potential disputes over the property.

It’s worth noting that a longer mortgage term can lower your monthly repayments. While 25 years is standard, shorter terms require higher monthly payments but significantly less total interest is paid.

Buying a home is one of the biggest financial steps you’ll take and understanding deposits, loan-to-value ratios and the support schemes available can make that step feel more achievable.

The key is to know your options, explore what help you’re entitled to and be realistic about what you can comfortably afford. **With the right preparation, you can move forward with confidence on your journey to home ownership.