Foster carers often face challenges when applying for a mortgage due to their unique income structure. With payments that are often tax-free and vary month to month, securing a mortgage as a foster carer can feel daunting.
Mortgage Knight helped Emma, a foster carer, navigate these obstacles and find a mortgage that suited her needs. This case study explains how we helped Emma secure a mortgage despite her non-traditional income.
Client Background
Emma, an experienced foster carer, has been fostering children for over three years. She receives a stable income from fostering, which is tax-free and includes allowances for the care she provides. In addition to her fostering income, Emma has a part-time job, providing an additional but modest income stream.
Emma wanted to buy a home, ensuring stability and more space for the children in her care. However, when she started her mortgage search, she faced challenges as some lenders were hesitant to consider her foster income.
Challenges in Securing a Mortgage for a Foster Carer
Emma faced specific challenges common to foster carers when applying for a mortgage:
Non-Traditional, Tax-Free Income: As Emma’s primary income comes from fostering and is tax-free, many lenders struggled to assess it in the traditional way. Some lenders were reluctant to include foster income in affordability calculations.
Fluctuating Monthly Payments: Emma’s fostering income could vary month to month based on the number of children she cared for and the duration of placements, making it challenging for some lenders to view her income as stable.
Minimal Employment Income: Emma’s part-time employment income alone wasn’t enough to meet most lenders’ affordability criteria, making her fostering income essential in her mortgage application.
Solutions Provided by Mortgage Knight
Mortgage Knight guided Emma through a tailored mortgage process, helping her overcome these obstacles with a strategy focused on her unique income structure. Here’s how we helped:
Connecting Emma with Flexible Lenders
Finding Lenders Experienced with Foster Carer Income: Mortgage Knight researched and connected Emma with lenders who specialise in non-traditional income sources, including fostering. These lenders understood the stability of foster care payments and were prepared to include her foster income in affordability assessments.
Combining Income Sources for Maximum Borrowing Potential
Using Both Foster and Part-Time Employment Income: By combining Emma’s fostering income with her part-time employment income, we maximised her borrowing potential. This approach made it possible for her to qualify for a larger loan, which wouldn’t have been achievable with employment income alone.
Calculating Foster Income as an Average Over 12 Months
Demonstrating Income Stability Through Averaging: We helped Emma compile a 12-month record of her foster payments to present a consistent income picture. This method reassured the lender that her income was stable, even with month-to-month variations.
Presenting Foster Income as Stable, Tax-Free Income
Highlighting the Benefits of Tax-Free Foster Income: Mortgage Knight worked with a lender who viewed the tax-free nature of Emma’s foster income as a benefit, as it increased her disposable income. This approach helped improve her affordability profile, contributing to her mortgage approval.
Outcome
With Mortgage Knight’s support, Emma successfully secured a mortgage with a specialist lender experienced in handling foster carers’ income. She was able to purchase a three-bedroom home, offering ample space for the children in her care.
By presenting her combined income and providing a stable 12-month foster income record, we made a compelling case for her financial stability. The lender approved her application, allowing her to achieve her homeownership goals.
Key Takeaways for Foster Carers Applying for Mortgages
Work with a Specialist Broker or Lender: Foster carers benefit from working with mortgage brokers who understand the nuances of foster income. Mortgage Knight connects foster carers with lenders who specialise in handling non-traditional income structures.
Organise Income Records: A clear, organised record of foster payments, preferably over the past 12 months, can significantly strengthen a mortgage application by presenting a stable income average.
Combine Income Sources When Possible: Combining fostering income with any other income sources, like part-time employment, can increase borrowing potential and make it easier to meet affordability criteria.
Select Lenders Who Understand Tax-Free Income Benefits: Some lenders appreciate the increased disposable income provided by tax-free fostering income, which can improve affordability assessments.
Why Choose Mortgage Knight for Your Mortgage as a Foster Carer?
Mortgage Knight has extensive experience helping foster carers navigate the mortgage application process. We connect foster carers with lenders who understand foster income and offer flexible mortgage products tailored to non-traditional income structures. Contact us today to discuss your mortgage options and take the first step toward your new home.
Frequently Asked Questions
Q: Can foster carers qualify for a mortgage based on foster income alone?
A: Yes, many specialist lenders consider foster income as a primary source, especially with a stable fostering history. Working with a broker helps identify lenders who recognise foster income as stable.
Q: Do I need to show a specific amount of foster income?
A: Most lenders prefer a record of consistent foster income, ideally over the past 6-12 months. Mortgage Knight can guide you on presenting foster income effectively for your application.
Q: Are there mortgage products specifically for foster carers?
A: While there aren’t mortgage products solely for foster carers, certain lenders offer flexible income assessments tailored to foster carers. Mortgage Knight helps connect foster carers with these lenders.
Q: How does tax-free foster income affect my mortgage application?
A: The tax-free nature of foster income can improve your disposable income, which may enhance affordability calculations. Some lenders recognise this benefit in affordability assessments.
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