Our Guide to Foster Parent Income Mortgages
Foster parents and fostering families provide an absolutely invaluable service in the modern UK. At the time of writing, some sources suggest that there are in excess of 65,000 children living with 55,000 such foster families.
However valuable that service is though, it is a fact of life that some foster parents indicate that they have experienced difficulties when trying to find foster parent mortgages.
Here we will examine that and how we can help.
Why are mortgages for foster parents difficult to get?
The difficulty begins when some mortgage providers assess an application for mortgages for foster parents.
The problem is that some such lenders do not regard fostering allowances as standard income. This may sound like a paradox because foster parents and their income are typically regarded as self-employed under many aspects of UK legislation.
However, the position arises because fostering allowances are often unpredictable in nature in terms of how much will be received through them during a given 12-month period. This might mean that some mortgage providers will feel uncertain about including such income in their calculation of how much might be lendable in a mortgage application situation.
To make matters even more complicated and difficult for those seeking foster parent mortgages, the income obtained through such allowances is often treated differently to many other forms of self-employed income. That’s because the sums received are declared on the SA302 tax calculation form (evidence of your income and contributions) net of deducted expenses.
What that means is that some mortgage providers will only use that net income in their calculations, with the final result being that the mortgage, at face value, appears to be unaffordable for the foster parents concerned.
Of course, this can be distressing and demoralising for many people offering foster caring services.
Fortunately though, we at NeedingAdvice may be able to assist.
Can I get a mortgage based on my income as a foster carer?
In principle, the answer to this question is “yes” – assuming you meet other appropriate criteria that are not necessarily related to your income.
The reason we might be able to help you find foster parent mortgages is because we know of mortgage providers who will take 100% of your gross foster parent allowances into consideration as part of their affordability calculations.
The net result of that will be significantly different and enable a much higher borrowing figure than if you are using a mortgage provider who insists on only looking at your net declared income figures on the above-mentioned form.
How much deposit will I need for a foster parent mortgage?
There may be some minor variations here, depending upon the mortgage provider concerned.
However, you should count on needing to find a minimum of 5% deposit from your own financial sources. Larger deposits offered voluntarily would typically be welcomed and may make the approval of a mortgage application that bit smoother.
Typically, that 5% is the same minimum deposit figure required of any other self-employed applicant.
How long must I have been a foster carer for?
As is the case with many questions relating to mortgage applications, a lot will depend upon the individual policies and interpretation of a given mortgage provider.
As a very general guideline though, many mortgage providers offering foster parent income mortgages will look into your history and expect to see at least six consecutive previous months’ of such an occupation and associated income.
Some conventional high street lenders may require a considerably longer period as evidence of activity and income. By contrast, some specialist providers of foster parent mortgages might be happy with only three months past history, usually consecutive, of such fostering income.
It’s worth noting though that there may be a relationship between the amount of past evidence you have of such income and the interest rates you might pay on any subsequently approved mortgage.
That’s because many lenders calculate their interest rates based, in part, upon their perceptions of the risks involved in lending to the applicant (which is why credit histories are also considered).
Mortgage applicants who do not have evidence of consistent employment income in the past might typically need to accept that lenders will perceive the risks of lending to be higher and therefore will set the interest rate likewise.
This applies not only to foster parent mortgages but typically also to other forms of self-employment as well as permanent salaried occupations.
Once again, our in-depth knowledge of specialist providers in this sector may be able to assist here.
What proof of income will a lender need?
There is no hard-and-fast rule defining what evidence lenders will ask to see as part of your evidence of income.
In most cases, potential lenders will ask for sight of your remittance advices received over the period they are considering, for example over the last six months. In some instances, they may also ask to see copies of your bank statements showing evidence that the remittance has been received (as well as your overall normal financial position).
It is unlikely that a lender will ask to see business accounts but it is theoretically possible.
Note that evidence of income and employment is only one factor used by lenders to assess mortgage applications. There may be many other factors involved, such as understanding your income levels versus your normal monthly outgoings and what that means in terms of affordability.
Can I re-mortgage my home?
Re-mortgaging normally involves changing your mortgage (perhaps from one provider to another) for one of two reasons:
- you wish to borrow money against property you already own, for whatever purposes. A common example might be where you wish to engage in home improvements;
- you’d like to change mortgage provider because you have identified one who is able to offer you more advantageous rates, meaning lower outgoings each month.
- In both cases, some providers of foster carer mortgages may be more than happy to assist.
As a general rule though, you may need to contact a lender who will accept 100% of your foster carer income in their calculations.
Next Steps – Foster carer mortgages
We know that most fostering families are keen to spend as much time as possible providing a supportive environment for the children in their care. That means minimising the amount of time they may need to spend on other things, including the formalities and administration associated with foster carer mortgages.
This is a specialist area and one where we may be able to offer you invaluable assistance.
Why not contact NeedingAdvice for an initial discussion which will be entirely free of obligation on your part, as well as totally confidential?