I've come across some some positive news in the way of pilot training finance in the last day or two. A new organisation has come forward to work alongside training organisations such as L3 Airline Academy to offer tailored second charge / equity release mortgages. I'll publish a seperate post soon.
IMPORTANT - BBVA UK WITHDRAW PILOT LOAN PRODUCT
As of Friday 5th May 2017 the BBVA UK Pilot Mortgage product has been removed from the BBVA UK website. Later the same day BBVA UK announced it is to close a number of branches in London and is to suspend the acceptance of applications for new banking products/services. In the notice posted on their website BBVA claimed "Branch closures impact assessments for customers across the BBVA branch network in London [and those] that have been conducted so far". As an active pilot mortgage customer, I reached out to find out more and was told that BBVA would no longer accept pilot loans for new customers as of November 2017.
If you have had the opportunity to read the about me page then you may have seen that my family and I used the services of BBVA bank to part-fund my training. The process of applying for the loan hadn't been documented in other cadet blogs and as a result I didn't really know what to expect - it was certainly rather lengthy/involved.
The purpose of this blog post is to explain the process and criteria at the time of my application in the hope this answers any questions you may have about the process. Soon after my application to BBVA, a second bank Secure Trust Bank, began offering finance to cadets but as I didn't have any dealings with them I can't provide any comment.
One thing I will say is that the process of applying for BBVA finance is a lengthy one and given I applied on 14th March 2016 the application did not complete, with funds becoming available, until 1st August 2016. I was therefore fortunate that I did not need the funds from BBVA until CTC's December Bond payment. With that in mind I'd recommend you get in touch with BBVA as soon as you know you require their support and that you send back any documentation they send you as soon as you are able.
Click on a heading below to expand it.
BBVA can fund part or all of your training in exchange for security over a property in the UK which has to be owned by the applicant, their parents or in some cases their grandparents. The total security would have to be assigned in it's entirety against the property and cannot be split between two or more.
BBVA will only accept properties where the total ratio of debt secured, inclusive of any funds you wish to borrow from them, does not exceed 60%. This percentage is known as a Loan-To-Value (LTV) and you can calculate the current LTV by taking the total value of existing mortgages or securities, dividing that value by the current market value of the asset and multiplying the result by 100. The answer will help you to understand the maximum BBVA will lend you. See the example below.
The new mortgage must be either the first or second mortgage against the property and BBVA will not agree to a mortgage if it were to be the third. There are other exclusions as to the type of properties accepted too, which I do not know or feel qualified enough to comment on so you will need to speak with BBVA on that front.
The minimum amount BBVA will lend you is £45,000 and the maximum is the full course cost plus up to £5,000 in living expenses. It is worth noting however, that the maximum figure is based entirely on the banks assessment of you and your guarantors (if any) and in my case the maximum I could borrow was £70,000. Even then such an amount was only permitted with both my parents and grandparents being jointly liable for repayments if I could not keep up with them. Every parties financial history was also reviewed, in detail.
Up to 12 years, inclusive of the 24 month payment holiday (read on).
I elected to repay my mortgage over 12 years which, while resulting in lower monthly repayments, does incur higher interest overall. You can of course opt to repay in less time but you should therefore expect to have much higher repayment amounts. For me, the ultimate decision was based on how much I could realistically afford to repay given the expected salary of a graduate pilot. I also considered the scenario where I couldn't find employment straight away - which has been known to have happened before - and came to the conclusion that the 12 year repayment amounts were much more attractive in this regard.
The interest on the mortgage is variable so whilst it is currently 3.0% plus the Bank of England base rate of 0.5% making 3.5% per annum, if the base rate increases over the 12 months so to does the rate of interest and therefore so do the monthly repayments.
BBVA do not charge for early repayment.
No - thankfully!
The repayment term you choose is inclusive of a 2 year repayment holiday meaning you do not pay anything whilst training, which typically lasts 18 months. This also provides a short period in the hope you would find employment with CTC's placement pool. However, with the placement pool varying based on industry demand it may be worth budgeting or thinking of a plan for repayment whilst you are searching for work. Having recently graduated from university I would try to enter the Plan B industry if payments needed to be made. Fingers crossed the industry is still great when I get to that stage - it's currently looking good but can change at any moment.
The repayments begin 24 months after you first spend the first £1 of your mortgage funds. In my case whilst my course starts on the 15th August 2016, I don't plan to spend BBVA funds until December 2016. This therefore means my first repayment would be the December of 2018. The first 24 months of repayments are then reduced 25% to account for lower salaries during your first couple of years of employment. Full repayments commence from month 25 to maturity.
Yes, you must also open a current account with BBVA London for the duration of the repayment term. This is a paid for account comparable in monthly cost to the high-street banks but you do not need to pay anything during training.
So, you've passed CTC's selection process and you've told BBVA you would like to apply for a mortgage with them, now what? Well.. prepare yourself, and your guarantors (if any) for the long task of finding, copying and printing evidence. We felt as though we'd killed a small forest by the time we had collected everything. If I remember correctly the total weight of all the A4 paper was nearly two and a half kilos which certainly led to one expensive postage stamp!!
One of the things I liked about my experience with BBVA was the fact every minúte detail of your evidence and application is reviewed by a person. There weren't any computerised reference/credit checks conducted and as a result I feel the bank really got to know me as a customer. There were times when reviewing my evidence left them with questions but instead of failing my application like a computer system may have, they gave me a call and we talked through them. Even after such discussion the bank did fail my application but on questioning their decision they asked for further evidence and later approved it.
The evidence BBVA asked for, from every individual party to the mortgage, included but was not limited to:
I posted the prepared evidence to BBVA in the middle of March 2016 and every day that went by I wondered whether BBVA would have an answer for me. In the end I waited approximately two to three weeks before hearing anything back from the bank and they then required further evidence from us to make a decision. Over the weeks that followed (yes.. weeks) I recall sending numerous emails to-and-fro with everyone speaking with the bank about one thing or another at least once. In the end it took around 6 weeks from posting the evidence to receiving confirmation that I was eligible. The maximum I could borrow was £70,000. I initially requested the full course cost although BBVA's reason for rejection seemed fair. Thankfully, with the support of my family and close family friends, we were able to find the funds for the remainder. I am still thankful for everyone's act of kindness to this day!
After verbally accepting BBVA's initial offer I then received the same offer in written form which I signed and returned alongside a current account opening form which then allowed BBVA to draw up a formal agreement which they sent to me a week later.
The formal agreement outlined everything you could possibly want to know about the contract my guarantors and I were to enter with BBVA. It detailed how much I was borrowing, how much interest would be charged and what my repayments would look like among other things.
The agreement also outlined additional fees associated with the mortgage which included:
|Application Fee (£650+VAT)||This covers BBVA's time in handling the mortgage application. This needs to be paid no sooner than the conclusion of BBVA's legal process and no later than receiving the first amount of money from BBVA.|
|Solicitors Fee (£950+VAT)||This covers the costs of BBVA's solicitors securing the mortgage against the property. This needs to be paid no sooner than the conclusion of BBVA's legal process and no later than receiving the first amount of money from BBVA.|
|Independent Legal Advice (Varies)||As a condition of the mortgage, the individuals providing their home/property as security must seek independent legal advice in regards to the risk involved in third-party security. BBVA estimated this costing £250+VAT but in reality it was closer to £375+VAT.|
|Current Account Fee (£8 p/m)||This is the fee for using BBVA's current account - which is a condition of the mortgage. It appears this fee is waived throughout the duration of the training though.|
After taking the time to read through everything in detail and allowing my guarantors to also read through everything we each signed the agreement and returned it to the bank. BBVA then instructed their solicitors to seek security against the property. In between sending the agreement back and waiting to hear from BBVA's solicitor, my new bank account details arrived alongside a shiny BBVA bank card (as pictured)
BBVA's solicitors got in touch with us roughly a week after we sent the signed agreements back. If you think the signing of documents is over, you'd be wrong. The bank's solicitors had produced a very official 'charge document' related to securing the mortgage against my guarantor's property and not only did it require the signature of all parties to the mortgage, but it also required the signature of witnesses over the age of 18 independent to the applicant and guarantors.
The banks' solicitors required the guarantors who provided security sought legal advice from their own solicitor and that the witness in their case be said solicitor. Meeting with a solicitor cost us about £375+VAT in legal fees. My guarantors believe that such a meeting was certainly worth while as the solicitor was able to decode all of the legal jargon used in the charge document explaining what exactly BBVA's terms were and what would happen in certain circumstances.
It was at this point I had to take a life insurance policy to cover 105% of the loan. The banks' solicitors provided a legal document which then assigned any payout to the bank in the event of my death. I used Paul Jones Finch Commercial for the insurance policies and the life insurance is to set me back roughly £5 per month for 11 years.
After signing all of the required legal documents and returning them to BBVA's solicitors we were informed all was now in-place pending the final approval of the already existing mortgage company. The solicitors sent a formal second charge request in late June with the mortgage company responding on Monday 1st August 2016. On the same day I received confirmation from BBVA that the funds had now been released for my use. Thankfully, for the sake of saving interest alone, I do not need to use any of these funds until December due to CTC Aviation's payment schedule.
When your BBVA pilot mortgage application completes you're introduced to an account manager who is there to answer queries and assist you with making payments. Whilst you have access to BBVA Online Banking you are unable to access your pilot mortgage funds without first having any access request, otherwise known as a drawn-down, approved by your account manager.
In my case CTC Aviation invoiced the sum of £24,800 for the Foundation Fee due on the 1st December followed by monthly security bond payments of £5,300. After speaking with my account manager I was asked to forward a payment instruction by email outlining my intentions. On receiving a copy of CTC Aviation's invoice, my account manager made the foundation payment directly to CTC Aviation on my behalf. This was fee-free due to it being the initial payment.
With respect of the security bond, my account manager told me that the bank would arrange for the sum of £5,300 to be 'drawn-down' (made available) in my BBVA Online Banking at the end of each month, thus allowing me to make bond payments directly to CTC Aviation myself.
Where interest is concerned, BBVA will only charge it on all funds currently 'drawn-down' under the mortgage. So, whilst I've borrowed £70,000 I will only be accruing interest on the £24,800 in December and when I make an additional payments to CTC Aviation, such as the bond payment of £5,300 in January, I will then be accruing interest on the £30,100 balance. Hopefully that makes sense.