If you’re looking to return to the UK from working abroad or you’re being paid in a currency other than sterling, you’ll probably find it more difficult to get an overseas income mortgage on a UK property. It’s not impossible, though, so read on to find out the important information you need to know when applying for a mortgage using foreign currency income.
Foreign currencies fluctuate, leading to more risk and instability for mortgage lenders. Some currencies are more volatile and create bigger risks, which lenders will mitigate by lending less or at a higher interest rate.
Can I get a UK mortgage with foreign income?
You can certainly use foreign currency income, whether employed or self-employed, to qualify for a mortgage, but there are greater restrictions on foreign currency mortgage lending than on a standard UK mortgage in pounds sterling due to the higher risk of lending in a different currency.
UK mortgage lenders, especially high-street banks, may be reluctant to lend in a foreign currency because of the potential for currency fluctuations. These fluctuations make it harder to predict currency exchange rates and the ongoing cost of mortgage repayments.
What foreign income is accepted?
While it might not be as straightforward, many UK mortgage lenders accept foreign income. Some accept a wider range of currencies than others, but generally, the most commonly accepted currencies include:
- Euros
- US Dollars
- Swiss Francs
- UAE Dirham
- Canadian Dollars
- Australian Dollars
- Yen
- Chinese Yuan
- Saudi Riyals
- Hong Kong Dollars
Does my employment type impact my foreign income mortgage application?
As with UK mortgages, your employment status could impact your application. Your lender will see you as a lower risk if you have a long track record of stable employment with the same company.
Types of mortgages available for UK foreign income earners
Most foreign income mortgages work the same – they allow you to buy property in the UK using overseas income. The lender will apply the correct exchange rates to your earnings and work out a deal based on the UK equivalent.
Many foreign mortgage lenders will also accept joint mortgage applications and may even offer expat mortgages if you live or work abroad.
If you don’t know where to start, a mortgage broker that specialises in foreign income mortgages will help you find the perfect product. Talk to Simmonds Mortgage Services today to discuss your options.
What documents do you need?
The lending criteria for foreign income mortgages are quite strict, particularly because of the risk to lenders. You may also face challenges when proving your income.
The documents you need may vary between lenders, but here’s a rough idea of what to provide:
- Proof of identity (passport, driving licence or ID card)
- Proof of address (recent utility bill or council tax bill)
- Proof of income (payslips, employer details, P60 or self-employment tax documents)
- Proof of deposit (bank statements)
- Recent bank statements
- Credit history report
What do lenders look at when reviewing a foreign currency income mortgage application?
There are other factors to consider when applying for a loan with overseas income, not just the currency in which your income is paid.
Currency exchange rate fluctuations
Foreign currency mortgages are subject to exchange rate fluctuations. This means if you have foreign currency income in a currency where there is a lot of movement against the pound, you may find it harder to find a lender willing to accept your overseas income.
Currencies that do not vary significantly or are generally strong, such as the US Dollar, Euro, and Swiss Franc, are more widely accepted by lenders.
Income source verification
You’ll need to supply information from your employer or your self-employed accounts to verify your income. You will also need a UK bank account from which you’ll make your mortgage payments in sterling.
Credit history
If you don’t have a current credit history in the UK, this could make it harder to get a foreign currency UK mortgage. Most lenders will want to see a good credit record, although there may be specialists who will accept bad credit for foreign currency mortgage applicants.
Your mortgage offer will likely come with a higher arrangement fee and a higher interest rate. A mortgage broker who understands foreign income mortgage approvals and can access many lenders will be able to shortcut the whole process.
What are the main challenges of applying for a mortgage with foreign income?
Finding the right lender is one of the main challenges you’ll face when applying for a foreign income mortgage. Fewer lenders in the UK offer mortgages to individuals with foreign income, so you’ll likely face lower loan amounts, higher interest rates and stricter application processes.
This is typically due to currency fluctuations, which influence not only the lenders’ terms but also your ability to repay the mortgage. If exchange rates fall, it can reduce the value of your income. Lenders look out for this, which is why the criteria and terms aren’t always favourable.
How can I improve my chances of getting approved for a mortgage with foreign income?
While it may not be easy to get a UK mortgage with foreign income, it isn’t impossible. There are steps you can take to improve your chances of approval and get a better mortgage deal.
- Build your credit history
- Prepare all your documents
- Put down a larger deposit
- Research everything (specialist lenders, exchange rate fluctuations, etc.)
- Work with a specialist broker
Let’s take a look at some of these in more detail.
Build your credit history
Lenders are more willing to give better deals to individuals with good credit histories. Building your own credit history takes time, but it’s worth the hard work. You can improve your credit and build trust with lenders by paying bills on time, registering to vote (this makes proving your address easier), repaying debt, and limiting credit applications.
Prepare your documents
Having your documents ready to send off not only makes the process much smoother but also shows that you are reliable and committed. Before sending any documents to the lender, it is crucial to check that all the details are accurate, including your name, address and any important figures.
Put down a larger deposit
If you have the funds to do so, putting down a higher mortgage deposit can help you secure a better mortgage deal with more appealing rates. Before jumping in, a foreign income mortgage broker can help you determine how much you would need to put down and if it’s achievable.
How to find a specialist lender that accepts foreign income
You can always search for a foreign income mortgage lender yourself by going online or asking a friend or family for advice. Some high street lenders offer specialist mortgages for individuals with foreign income. It’s essential to do your research and look for the best interest rates, terms and loan amounts that suit your situation.
Working with a specialist broker who knows the market and has many connections can help simplify and speed up your search. They have the tools and knowledge to assist with even the most complex circumstances.
See our case study, in which we helped our client secure a foreign income mortgage.
Get in touch with Simmonds Mortgage Services about foreign income mortgages today
Getting foreign currency mortgages may require using specialist lenders who are experienced in multi-currency mortgages. We offer expert advice to UK and foreign nationals and expats looking to buy property using a UK mortgage based on foreign income. Call us on 01184 693037 for a no-obligation chat about your personal circumstances and the sorts of products that suit you.
Frequently asked questions about foreign income mortgages
Can I get a joint mortgage as a foreign income earner?
Yes, it may be possible to get a joint product with overseas income.
Do I need an independent mortgage broker to find a foreign-income mortgage?
Due to the increased risk associated with overseas income mortgages, it can be beneficial to use a broker who can assist you with your mortgage approval to avoid any issues with the paperwork.
Can I use overseas income for buy-to-let property purchases?
Yes, it is possible to find companies that will accept applications from buy-to-let investors with income from other countries. Be prepared for the loan to be more expensive than a standard BTL loan in GBP, though.
Is a foreign national mortgage the same as a foreign income mortgage?
A foreign national product is aimed at a non-UK citizen who is paid in sterling, whereas a foreign income product is usually for UK citizens who are paid in an overseas currency.
Can I get an overseas income mortgage in Northern Ireland?
Yes, it is possible with similar restrictions to those found in the rest of the UK.
What is a foreign currency mortgage haircut?
A foreign currency income haircut is simply a percentage reduction in value – from the market value to the value that can be used to secure a loan. This helps manage the lender’s risk, allowing for expected changes in the exchange rate.
If you earn $150,000 (USD), the income is converted into sterling, for example, £118,000 (GBP) and then another 10-20% might be deducted for currency fluctuations, so you might get an offer based on £95,000 income.
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