Mortgages for Foster Carers: Where and How to Get One
As a foster carer, varying income may mean it is harder to secure a mortgage for a house. Mortgages for foster carers are possible, but using an adviser may be useful. Read on to find out more about how to secure a loan for a house and the support available for foster carers.
A key part of being a foster carer is being able to provide a safe and secure home for the children you are fostering.
However, getting a mortgage as a foster carer is not always straightforward. This is because your monthly income may vary depending on the number of placements you have at any one time, and also because different lenders will assess fostering income in different ways.
Why is it difficult for foster carers to get a mortgage?
Welcoming foster children into your home can be expensive, and many carers need to give up or reduce their working hours to do so. For this reason, foster carers receive foster care pay – also known as a fostering allowance – to ensure they can provide this vital service.
Foster care pay is typically around £22,000 a year, or around £400 a week, per child – however, it can vary according to the placement. Different rates are likely to be payable according to whether you are providing emergency, short-term, or long-term foster care. You may also get higher rates for children with additional needs.
This means foster carers’ income can vary substantially, making it hard for lenders to assess affordability.
How do lenders treat foster care pay?
Different lenders will have different approaches to foster care pay. Many will treat you as self-employed and consider your ‘net profit’ after deducting foster care allowances. This means that the income your lender is assessing will be substantially lower than your actual income.
Lenders may also stipulate that you should have been fostering for at least six months. They may also request a letter from a fostering agency or local authority confirming that you are likely to carry on fostering for the foreseeable future.
How to find a lender
The complexity surrounding income verification for foster carers may mean you have less success with high street or mainstream lenders. For this reason, it can make sense to speak to a mortgage broker with specialist experience of dealing with foster carers.
A good mortgage broker will understand how foster carers’ income works and appreciate the differences between the provision of respite care, long- and short-term placements as well as special guardianship, for example.
Armed with an understanding of your earnings they will be able to pinpoint the lenders most likely to accept your mortgage application. Specialist lenders may well be able to take 100% of your foster care earnings into account.
Rather than using your self-assessment tax returns to assess your affordability, lenders with a more pragmatic approach to foster carers may instead use your remittance slips.
What types of mortgages can foster carers get?
Eligibility for mortgages will depend on affordability tests, but so long as you meet a lender’s criteria you should have access to a range of mortgages, including fixed- or variable rate options.
How competitive the rates are will depend on your affordability and credit score, with the best rates reserved for those with the best credit scores. Bear in mind that lenders may also treat your foster children as dependants in addition to your own children if you have them, which could reduce your overall affordability.
As a foster carer, you won’t necessarily need to stump up a bigger deposit than other borrowers and, depending on your circumstances, you may be able to get a mortgage with a deposit of as little as 5%.
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If you have become a foster carer since taking out your current mortgage, you should also be able to remortgage – but you may still need advice from a broker or lender that understands your situation.
Is there any support to get foster carers onto the property ladder?
There is no specific government support to help foster carers buy property, but you may be eligible for universal schemes such as Help to Buy.
Help to Buy includes an equity loan scheme that offers first-time buyers in England with a 5% deposit a 20% equity loan (40% in London). In Scotland, the loan is up to 15% of the property’s equity and in Wales the maximum property value is £250,000.
If you are aged 18 to 40, you may also be able to use a Lifetime ISA to help you build a bigger deposit and reduce the overall amount you need to borrow. The government pays savers a 25% bonus on savings of up to £4,000 a year, giving an annual top-up worth up to £1,000, so long as the money is used to buy a first property or for retirement.
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Rachel Lacey is freelance journalist with 20 years experience. She specialises in personal finance and retirement planning and is passionate about simplifying money matters for all. Read more