Mortgages for Foster Carers
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How mortgage providers consider income from fostering differs from lender to lender. As a result, some could extend you a higher amount with a better rate, while others will require you to have a larger deposit.
Here, we explain the intricacies of applying for a mortgage as a foster carer, if there is any mortgage help available and where you can look for any guidance you may need during the process.
The following topics are covered below...
Are there specific mortgages for foster carers?
No, not specifically for this type of profession. However, there are lenders that will accept 100% of a person’s foster care income to calculate affordability for a potential mortgage.
As a result, those mortgages are more likely to be for a higher amount than if only your other sources of income were considered.
So, while these mortgages are not specifically for foster carers, they have more preferential eligibility criteria for people in certain professions, such as foster parents.
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Eligibility criteria
Standard eligibility criteria varies from lender to lender, depending on the mortgage product. Typically, lenders will look at the following to determine how much they are willing to extend to you.
Lenders consider foster care income in different ways. Some will accept 100% of it, others may only accept a capped percentage and a few won’t accept it at all.
If they do accept foster care income, you will likely have to provide supporting documents as evidence of it.
Those documents may be your SA302s or a letter from the agency that places the child, which confirms the total income paid to you.
If you have other sources of income, depending on where it comes from, lenders may accept that to help support your application.
In general, you will need at least a 10% deposit from an acceptable source for a mortgage provider to consider your application. However, this is not a hard and fast rule.
Some will require more, or maybe even less, depending on other factors in your application.
Mortgage providers like to see a good credit history with no record of missed payments.
If they do see missed payments that amount to a bad credit rating, it could mean they extend you less or offer a higher interest rate mortgage.
All lenders follow the legal age of majority and have a minimum age of 18 for their traditional mortgages.
The maximum age is typically between 70 and 75 years. There will be exceptions, however, depending on the specific provider.
Usually, the higher your income and deposit, the higher the mortgage amount extended or the better the rate. The better your credit score, the more likely you are to have your application accepted.
How a broker can help
Applying for a mortgage as a foster carer is a complex and specific niche of the mortgage market. While you may find a provider on your own that will accept your foster income as part of your application, it is a good idea to approach a broker for help first.
The mortgage brokers we work with will be able to identify who can offer you the best rates and loan amounts, depending on your foster care earnings, other income sources and your deposit. As a result, they can help save you money, while maximising your chances of successfully applying for a mortgage.
If you get in touch we can organise for an advisor with experience arranging mortgages for people in this profession to contact you straight away.
Mortgage schemes to help
Currently, there are no specific mortgages designed solely for foster carers, but there are schemes that you could apply for, which are designed to assist people on lower incomes or with a smaller deposit.
Right to buy or Right to acquire
Right to buy or Right to Acquire may be an option for you if you are living in local authority housing and meet other eligibility criteria.
It is available in England, Wales and Northern Ireland (though the schemes vary slightly in each country), but it is not available in Scotland.
It allows you to buy the home you are renting from your council, at a discount, so that you need a lower mortgage.
First Homes scheme
The First Homes funding scheme is a government-backed initiative where a certain portion of all new homes in a development have to be offered at a 30% – 50% discount to market price.
For this scheme, you are only eligible if you are a first-time buyer and your total household earnings are below £80,000 (or £90,000 in London).
Additionally, the house price must be below £250,000 outside London and below £420,000 within it.
It means that if you are finding it difficult to raise funds through a traditional mortgage, you could still purchase a property at the discounted price.
However, under this scheme, the discount you are given must be passed on to any future first-time buyers of your home.
Starter Homes scheme
If you are a first-time buyer and looking to buy a new build, you may be able to buy through the Starter Home scheme.
The government-backed initiative helps young buyers (deemed as those under 40), as it has made 200,000 new build homes available at a 20% discount.
If you are struggling to find a mortgage high enough with your foster income, you may be able to afford a home through this scheme, therefore.
Shared ownership
The shared ownership scheme is run by the government and has slightly different versions in each of the UK’s nations with their own specific eligibility requirements.
However, commonly, a shared ownership scheme means you can purchase a portion of a property with a mortgage and simply rent the ‘remaining’ part from the landlord, which is usually a Housing Association.
As you only need a smaller mortgage, you may find it easier to get on the property ladder this way.
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Which mortgage lenders accept foster carer income?
There are mortgage lenders who don’t accept it at all, such as Scottish Widows, Metro Bank and Virgin Money. Other mortgage providers will treat foster carer income the same way as any other type of earnings, but most lenders place caveats on it.
For example…
- Generation Home: Needs foster carers to evidence a 12-month track record in this field before they’ll consider them for a mortgage.
- Leeds Building Society: Only accepts foster carer income as a supplemental source of capital, but will let you declare 100% of it.
- Bluestone Mortgages: Needs you to have been fostering for at least two years but will base any mortgage offers on your income over the last 12 months.
- Barclays: Treats all children you’re fostering as dependents when assessing affordability and will request evidence that your income is sustainable.
The best way to avoid strict lender caveats and find a lender who will accept 100% of your foster carer income first time is to apply through a broker. There are mortgage advisors that specialise in helping people in this line of work, and they have deep working relationships with lenders who understand the needs and income specifics of people in your profession.
What rates do these lenders offer?
Technically speaking, foster carers have access to the same interest rates as people in other professions.
You can boost your chances of landing the best rates by doing the following…
- Putting down extra deposit: This can minimise any risk the lender might associate with your profession.
- Wait until you have at least two years’ trading behind you: This will increase the number of approachable lenders and help you access a wider range of deals.
- Clear any debts you’re in a position to settle: This can strengthen your credit report and therefore your application.
- Speak to a mortgage broker: Specifically one who has a track record of helping foster carers get onto the property ladder. They often have access to exclusive rates and deals for professionals, including full-time fosterers.
Other types of mortgages suitable for foster carers
If you are not eligible for the above schemes, you may find that applying for other types of mortgages could help instead.
Below are approaches which may improve your application’s chances based on your foster care income alone:
If you can increase your deposit with a financial gift, you can sometimes borrow more. However, if you are given financial aid, it must be a gift and definitely not a loan.
If it is a loan, a mortgage provider will have to take your repayments into consideration in affordability calculations. If it is simply gifted, your larger deposit may attract lower interest rates. The gift often comes from a family member, but it does not have to be.
A family assisted mortgage could be an option if you are not given equity outright to increase your deposit. Family assisted mortgages work by having a family member pay at least 10% of the property price into a separate holding account for a set period of time.
To buy the property, you take out a mortgage for 100% of the property price, which you pay back as normal. After the set period of time, your family member receives back their deposit from the holding account with accrued interest.
A guarantor mortgage may be appropriate with foster care income if you have a third party who is happy to act as a guarantor. It means that you can sometimes borrow more as the third party is taking on some risk of the mortgage.
They essentially become liable for repayments if you cannot make them, so providers may be happier to loan you more.
What if you have bad credit?
If you are a foster carer with a bad credit history, it may be more difficult to find a mortgage lender who will extend you a loan. However, it’s not impossible. There will be mortgage providers who will look at your foster care income and deduce whether it strengthens the rest of your application.
Finding a mortgage provider who extends you a loan when you have bad credit, regardless of your income, is harder though. Providers may demand a larger income or a bigger deposit to compensate for the perceived higher risk of lending to you.
That’s why using a mortgage broker who specialises in bad credit can be so beneficial. With their expertise, they will know which providers to approach based on your entire situation, improving your ability to have your mortgage application accepted.
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Get matched with a broker who specialises in mortgages for foster carers
Choosing the right mortgage to apply for is critical. The best way to do that is to ask the advice of an expert mortgage broker who is a specialist in this field. Our matching service will be able to connect you with a mortgage broker who specialises in foster carers for free and with no obligation to take things further.
Call 0808 189 0463 or enquire with us today to get started.
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FAQs
Yes, it’s possible. If a mortgage provider accepts 100% of your foster care income towards your affordability calculations, they will extend you a higher amount which allows you to buy a larger property.
Most mortgage lenders will need you to have been earning income through fostering for at least six months before they will consider offering you a mortgage.
There are, however, lenders who might consider you after three months, though the rates might be less favourable.
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Pete Mugleston
Mortgage Expert, MD
About the author
Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!
