Can Foster Carers Get a Mortgage?

August 5, 2020
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Being a foster carer is a challenging but rewarding role. Opening your home to children in need is not just an altruistic act. Foster carers are paid an allowance to cover the cost of caring for the child in addition to a personal stipend. Foster carers also undergo extensive on-the-job training. So in many ways, it can be considered a career. As a foster carer, you will enjoy tax benefits which can help to boost your income. But what about other investment options? For example, can foster carers get a mortgage?

You may be pleased to learn that it is possible to get a mortgage as a foster carer. You will be treated as any other self-employed person. As it is typically harder to get a mortgage when you’re self-employed, there may be additional steps you need to take. But the good news is that you can get a mortgage as a foster carer.

Do I need a specialist foster carer mortgage?

There isn’t a specialist foster carer mortgage, but there are lenders who are more accustomed to working with foster carers. Looking for a lender that understands your unique situation is one way to ensure that you can sign on the dotted line for your dream home.

The most important thing to look for is a mortgage provider that will consider 100% of your earnings from foster care. Some lenders will only consider a smaller percentage, which means that you won’t be able to borrow as much. This means you will either have to set your sights on a cheaper property or save a larger deposit.

How do I get a mortgage as a foster carer?

If you are a foster carer and you want to get on the property ladder, move house, or remortgage your current home, you will need to find the right lender for your needs.

Foster carers are considered to be self-employed for tax reasons, which means that you file your own self-assessment tax return. This tax return will be used to calculate affordability, and you may need multiple years of tax returns to be able to apply.

This all varies depending on the lender. Many lenders only want to see that you have been fostering for a minimum of 6 consecutive months. This can become complicated if you are a respite foster carer, or if you are a short term foster carer. This is why it is vital to speak to a lender that understands the foster care sector.

How much deposit will I need?

You will need a minimum of 5% of the value of the property as a deposit if this is your first home. If you are purchasing a buy-to-let property, you may need as much as 40% of the value of the home as a deposit.

Unfortunately, banks will no longer issue mortgages that are 100% of the value of the property. You will also find that a smaller deposit will lead to higher fees. This means the more deposit you can provide, the better mortgage deals you will be able to access.

Can I use the help to buy scheme?

If this is your first home, you can use an equity loan to boost your deposit. The Government will top up your 5% deposit to 25%, allowing you to buy a new home with a 75% mortgage. You won’t have to pay fees on the 20% loan for the first 5 years of living in your new home.

You could also explore shared equity schemes which will allow you to buy a percentage of a home and pay rent on the remaining share. You can then purchase further shares in the future when you have more money to spare.

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