Why does the currency of my income impact my mortgage application?

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Why does the currency of my income impact my mortgage application?

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    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 use foreign income to qualify for a mortgage?

    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 that make it harder to predict currency exchange rates and the ongoing cost of mortgage repayments.

    Does my employment type impact my foreign income mortgage application?

    As with a UK mortgage, 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.

    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 which do not vary significantly or which are generally strong, such as the US dollar, Euro and Swiss Franc, are accepted by more 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 repayments in sterling.

    Credit history

    If you don’t have a current credit history in the UK, this could make it harder to get UK mortgages. 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 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 risk for the lender, 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.

    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 to 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 who 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.

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    Andrew Simmonds

    Andrew Simmonds is the managing director at Simmonds Mortgage Services. He's been providing mortgage advice to home owners for many years.

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