Partner and Head of Wills & Estate Planning at Andrew & Co Solicitors Helen Newson writes...
Long Service Advance of Pay, or LSAP, is an interest free loan system offered by the Ministry of Defence.
It is designed to give military personnel a loan to help them buy a property and is INTEREST FREE.
How does LSAP work?
In order to apply under the LSAP scheme, you will normally need to have found a property you wish to buy that a recognised institution, such as a bank or building society, is willing to offer a mortgage on. You then apply for an LSAP loan through your military employer
What sort of property can I buy?
LSAP loans are only available on residential properties, you cannot use them to buy a business property. Also it must be the only property you own and be a freehold house or Leasehold flat with at least 70 years left on the Lease, of a standard construction. Unfortunately LSAP loans are not available to purchase any mobile homes, houseboats or caravans.
Am I eligible?
You will need to have served in the military for 4 years after completing phase 1 training if you are in the Army or Air Force. If you are in the Marines or Navy, you will need to have been accepted onto the trained strength. Also:
- You must remain in the military for at least another three months before you are discharged
- You must be medically fit
- You must not have been warned for discharge
- You cannot have been paid any terminal benefit
- You cannot have made an application for Premature Voluntary Release – unless you qualify for a terminal grant which is bigger than any LSAP loan (and out of which you are able to repay the LSAP loan)
How much can I receive?
Depending on your circumstances you can receive up to £8,500.00 or 182 days pay, whichever is lower. However a loan of more than £5,000.00 will attract a tax liability because the Inland Revenue will regard it as a beneficial loan.
How do I pay it back?
If you have 12 years or more to serve, payments will be taken directly from your salary at a rate of 10% per year in equal monthly installments over a 10 year period. The payments will start 2 years after you take out the LSAP loan.
If you have more than 10 years but less than 12 years to serve, payments will be taken directly from your salary as above but will start whenever your last 10 years of service commence.
If you have less than 10 years to serve, again payments will be taken as above but will start immediately, with the final balance being recovered from your final salary/terminal benefits.
Please ring 01522 512123, (Lincoln) 01636 673743 (Newark) and ask for a no-obligation quote as soon as you decide to move home. Our conveyancing team will be happy to advise you.