UK Mortgage Foreign Income
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Mortgages For Professionals with complex incomes through the main high street lenders
High street lenders typically provide more appealing rates, making them the preferred choice for many professionals seeking mortgage solutions. However, navigating the complexities of professional incomes can present challenges in securing loans from these lenders.
Professionals often assume they must seek alternative lenders due to the intricacies of their income streams. Yet, armed with a deep understanding of various payment structures, we confidently facilitate successful mortgage applications with high street lenders.
In fact, a substantial 93.4% of our mortgage applications are seamlessly processed through reputable high street lenders, showcasing our expertise in navigating complex income scenarios.
UK Mortgage Foreign Income (Part One)
Can I get a UK mortgage based on foreign currency?
Yes, you can. It tends to be fairly major currencies, though. It’s not all of them – if your income is in Indian rupees, for example, we will struggle with that. Lenders tend to limit it to major currencies, such as US dollars, euros, Swiss francs and so on.
Certain lenders will look at a number of additional currencies: Australian dollars, Bulgarian Lev, Canadian dollars, Czech koruna, Danish krone, Hungarian forint, Japanese yen, New Zealand dollars, Norwegian krone, Polish zloty, Romanian leu, Singapore dollars and Swedish Krona are all acceptable.
These are predominantly European currencies that are not in the Eurozone. But the key thing is that not all currencies are acceptable.
Why can it be difficult to get a UK mortgage on overseas income?
The key thing is that lenders like certainty. Things can be uncertain if you’re borrowing in sterling and your income is coming in each month in Polish zloty or Swedish Krona. There is a risk every month – because the exchange rate will vary between the sterling you’re borrowing in and the currency you’re paid in.
That’s why quite a few lenders, mostly in high streets, won’t assist you with a foreign currency income. They’re obliged by the Financial Conduct Authority to monitor exchange rates and tell borrowers using foreign income for a mortgage if exchange rates have fluctuated by more than 20%.
Lenders don’t like the inconvenience of having to monitor each individual mortgage currency, so they choose not to deal with these mortgages. But plenty of lenders will have a look and are prepared to go through this monitoring exercise.
Are there plenty of lenders for a mortgage with foreign income?
Yes, there are enough bigger high street lenders that do accept a number of currencies, but it does limit the choice. Most smaller lenders steer away from accepting foreign income for the reasons I’ve given previously.
Do UK lenders apply stricter criteria for mortgage applications with income from high risk countries?
Yes, although it depends on the definition of high risk. It tends only to be the major currencies that lenders are happy to accept. So an income stream in US dollars is fine. That wouldn’t be described as a high risk country, and similarly with the euro.
Where you do tend to see a reluctance to accept income is not necessarily about the country itself, but because exchange rates there fluctuate more widely. These include the Indian rupee and Icelandic krona. Those currencies fluctuate widely against sterling and are avoided by lenders.
Do I need to declare my foreign income?
If you’re trying to use that income to get the mortgage through, then yes. Lenders will either not accept it or they will accept part of it, with a bit of a haircut on how much they will use.
If you have enough sterling income that’s provable and acceptable to lenders, and the foreign income is just the cherry on top, the mortgage will go through with sterling income. There’s no need to declare the additional income because lenders will ignore it anyway.
Can you get a UK mortgage if you work abroad and have foreign income?
You can, but it does depend on the UK tax and residency situation and who is going to occupy the properties you’re looking to buy. For example, if you work in Dubai and you’re paid in US dollars, but you want to buy a property in the UK for your family members to live in, that’s fine.
You can buy here if you work abroad, but not in all circumstances. It purely comes down to your plans for the property and indeed where you’re living, because there are restrictions in some countries that may stop lenders from assisting.
Which currencies are accepted by UK lenders? Are there any common foreign currencies that aren’t accepted by UK lenders?
The majority of lenders that accept foreign currency income are comfortable with major currencies such as the US dollar and the euro.
Some smaller currencies are accepted, but not all of them. I gave a full list of typical currencies earlier on in the podcast.
How does it work on a joint mortgage where one of us has foreign income?
It depends whether we need to use the foreign income to get the mortgage through. Lenders assess how much they’ll lend by assessing what’s affordable. If we can get a big enough mortgage just using a sterling income, we would ignore the foreign currency income.
If, however, we are looking to get a mortgage based on both incomes, i.e. the sterling and the currency income, we would need to find lenders that are comfortable with that particular currency.
How does the mortgage process work if I am self-employed and applying with foreign income?
If you complete a tax return in the UK, lenders are absolutely fine to accept that, because generally the income on the tax return is shown as a sterling figure.
If you’re self-employed and some of your income comes from jobs you do in America or in the Eurozone, that just features as part of your total income package. That’s also fine.
Perhaps you’re a self-employed contractor working on boats and your income comes in US dollars, even though you file a UK tax return. That income is still generally accepted by the lenders that accept foreign currency income.
So being self-employed and having a currency income is not necessarily a bad thing. It just means that the choice of lenders might be slightly limited.
What if I have bad credit? Can I get a foreign currency UK mortgage?
It depends how bad it is – it’s always the answer here. Let’s say you’ve had a small default from a mobile phone contract that involved an ongoing payment you were unaware of. A default like that might still cause problems for you.
Having a foreign currency income limits the number of lenders we can approach for a mortgage. If you have an element of bad credit as well, that further limits the lenders available. So the net you’ve cast is becoming smaller with any adverse information registered against you.
It won’t stop you completely, but it does depend on your personal circumstances and how bad the credit position is.
What else do we need to know before coming back for Part Two?
I think we’ve covered most of it. The key thing is that if you’re not sure, talk to a broker – and preferably one that specialises in mortgages with currency income involved.
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UK Mortgage Foreign Income (Part 2)
Is it harder to get a mortgage if my employer is based abroad?
No, not if you’re actually paid in sterling. If you’re paid in a foreign currency by your employer who’s based abroad, though, it will potentially limit the number of lenders we can look at. If you’re paid in sterling, which is by far the most common circumstance, it’s not an issue at all.
Are there specific types of mortgage that are more suitable for foreign income?
No, not really. It all comes down to an individual client’s circumstances, their attitude to risk, any future plans to move or any requirements to pay a lump sum off the mortgage. Those are really the key issues that will drive the advice in terms of type of rate – i.e. if you choose a fixed or a tracker – rather than the fact that your income might come from a non-sterling source.
How do exchange rates impact my mortgage application? Will my mortgage payments change if my income currency fluctuates?
The payments won’t change if you’re on a fixed rate, but your income level will fluctuate due to those exchange rate movements.
If you are paid in a foreign currency every month, you need to budget to allow for fluctuation in those monthly receipts. You’ve been used to doing this anyway. If you are paid in a foreign currency and the exchange rate isn’t fixed by your employer, or set once a year with your employer, then you do need to budget for fluctuations in your income. But your monthly mortgage payments won’t change if you’ve chosen a fixed rate.
In terms of the actual application, lenders look at the exchange rate when you apply for a mortgage and use that until they produce their formal mortgage offer for you.
If exchange rates do move significantly, either in your favour or against you, that’s not relevant in the mortgage process. The lenders take the circumstances at the time you apply for the mortgage. But, again, you need to be aware that if exchange rates have moved against you, you won’t have as much income. You’re still going to have the same level of mortgage to pay.
Will lenders apply a haircut or discount to my foreign income? What percentage is common?
It would be nice if there was a set standard across the industry that foreign income lenders use, but there isn’t. Some lenders will apply no discount or haircut. Some will apply a 25% reduction to the income they’re using, to allow for fluctuations. That’s where this ‘haircut’ terminology comes in.
Being paid in US dollars or euros doesn’t mean that lenders will take all that income into account. Some lenders will, but not all. It’s just something to be aware of.
How does my foreign income affect the amount I can borrow for a mortgage?
It really depends on the lender. As I’ve mentioned, some lenders won’t take any foreign income into account when they’re looking at how much you can afford to pay on a mortgage.
Some will take 75% of your income and some will take all the income based on an exchange rate at the time of application. There’s no set standard. It varies massively from lender to lender – and indeed, some major high street lenders don’t take any income at all if it’s from a non-sterling source.
Can I combine foreign and UK income to improve my mortgage application?
Yes, you can. Again it would be with those lenders that accept foreign income, which isn’t all of them. It can depend on the source. If it’s foreign investment income, some lenders are okay with that. The same goes if it’s a second job or a bonus – which tends to be the most common reason we’re asked to look at foreign income as well as sterling.
Providing we’re with the right lender, some or most of that income can be allowed. The key thing, because it’s such a complex circumstance, is that you really need to chat to a broker to make sure that everything is being considered correctly for you.
Is there a minimum time I need to have lived in the UK to qualify for a mortgage with foreign income?
No. It does vary again from lender to lender and whether you are a foreign national in receipt of foreign income. It depends on your residency status and indeed deposit levels, with most lenders. In terms of minimum time, there’s no single rule, but it does get easier the longer you’ve been in the UK.
Lenders are very heavily reliant on computers to view your credit profile and credit history. They like to see that you have a UK bank account and UK credit facilities. It just gives them more comfort. There are lenders that don’t need to see that, however, and can take a global view of the situation – but they’re fairly few and far between.
Are there any restrictions on the type of property I can buy with foreign income?
It’s all going to come down to the lender’s perception of affordability for clients. The actual property itself isn’t affected by foreign income, but there are an awful lot of conditions as to what lenders will and won’t accept when it comes to property.
If there’s Japanese Knotweed near the garden of the property you’re buying, that can be an issue whether you’re paid in sterling or foreign income. Or, if it’s above a commercial premises, or has a short lease, some lenders don’t like that. There can be literally hundreds of reasons why lenders don’t like a particular property – that’s irrespective of foreign or sterling income. It’s all down to the property itself.
Can I use a UK guarantor to support my mortgage application with foreign income?
Yes, potentially. Generally, if a family member will go on the mortgage but not necessarily on the deeds to the property, we can use their income to boost the potential borrowing levels.
The guarantor type mortgage has largely disappeared now, and been replaced by something called a Joint Borrower Sole Proprietor mortgage. This is just a guarantor mortgage with belts and braces. Rather than just signing a document admitting that they will be liable for the mortgage, the guarantor is actually named on the mortgage as a joint applicant, but they don’t go on the deeds of the property
It’s more reassuring from a lender’s perspective. Potentially you can use a UK guarantor or joint borrower to support the mortgage application if you’ve got foreign income – or indeed if they have foreign income, providing it’s from an acceptable currency and source.
Are there any additional fees or taxes I should be aware of when applying for a mortgage with foreign income?
There’s nothing additional simply because you have a foreign income stream. Just the normal costs and expenses incurred in any mortgage application. The foreign income doesn’t add to that at all, or shouldn’t.
Can I apply for a joint mortgage if my partner has UK income and I have foreign income?
Yes, providing it is with a lender that will accept foreign income, as not all lenders do. As long as the circumstances are set out clearly at the start, there’s no reason there would be an issue if you have foreign income and your partner has sterling income.
What else do we need to know about mortgages with foreign income?
As ever, the key thing is to talk to a broker that’s used to dealing in mortgages with foreign income sources. It’s not straightforward, and you can’t just walk up and down the high street and pick any lender.
It needs to be a lender that will accept foreign income for a mortgage application. So talk to a broker – obviously, Davidson Deem is a great choice. But the key thing is to talk to a broker that’s got experience in this sector.
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UK Mortgage Foreign Income Part 3
What kind of deposit should I have for a mortgage with foreign income?
A mortgage on foreign currency income is always that little bit more difficult to get, so any increased deposit does help your mortgage.
In many ways, the larger deposit you can get, the better. But strictly speaking, a lender’s foreign income policy doesn’t necessarily marry with the level of deposit. It’s a separate piece of criteria, so normal deposits should apply.
An underwriter will always gain more confidence if the deposit is a bit bigger, though, especially if it’s something a bit unusual like a foreign income currency mortgage.
Does it make a difference if I’m a First Time Buyer and I’m looking to use foreign income?
Again, not really. It all depends where your income is from. I’m presuming that you are a UK passport holder, and you’re earning income in a foreign currency.
Any First Time Buyer mortgage always gets a little bit more scrutiny from an underwriter because you simply don’t have a track record of paying a mortgage. But there’s no reason why a First Time Buyer with a foreign currency income cannot get that mortgage.
What if I want to purchase the property as a Buy to Let? Can I do this if I’m using foreign income?
It should be easier, in theory, because Buy to Let is primarily based upon the rental income that the property can generate, which obviously will be in sterling.
Some lenders have a minimum income criteria, so therefore some emphasis is put on your earnings. As we have mentioned, only a limited number of lenders accept foreign currency income. We would be looking at those lenders that also do Buy to Let – and not all lenders will do both.
But it should be achievable, because most of the underwriting is based on the sterling rental income, not your earned foreign currency income.
Should I try the lender that I have my bank accounts with first?
It depends on who you bank with. Some of those high street lenders will do foreign currency income mortgages, and some won’t.
All the banks will accept your income in foreign currency, that’s not an issue, but it doesn’t mean they will automatically lend you a mortgage based on that foreign currency income.
There are some weird and wonderful rules around this, which is why some lenders have an issue with it. Some of them have chosen to meet those rules, and some have just chosen not to take foreign currency income.
There’s no harm in approaching your own lender, but it would be probably more down to pot luck than the relationship you have with your bank.
How long does the application process take with foreign currency income?
It can take a little longer. First of all, there’s just the general underwriting of that income, where most lenders will apply a ‘haircut,’ where they don’t use all the income to allow for currency fluctuations.
If there are any non-guaranteed elements to your pay, elements that fluctuate, the lender will probably want an employer’s reference or something along those lines. That can lengthen the process.
Because you’re earning in a foreign currency, it might mean the company is based abroad, which can lengthen it as well. It’s prudent to allow a little bit longer for one of these mortgages to go through. I don’t mean weeks and weeks, but it wouldn’t surprise me if this added up to a week to the normal underwriting process.
How does the remortgaging process work with a foreign income?
I’m presuming that the original mortgage you got was also based on foreign currency income. It’s positive, in that you have already got a mortgage, but the remortgage process is still a bit more difficult because obviously we are working from a smaller number of lenders.
You’re moving from an already small pool of lenders and looking to move from lender A to lender B. The best rate might be with lender C, but they don’t take the foreign currency income.
If you’ve got the mortgage agreed the first time around, you’re more likely to get it agreed for a second time. Don’t forget, we’re also able to renew you with your current lender, which has no underwriting whatsoever. That’s always an option.
We only tend to look at remortgaging if your current lender’s offering is extremely uncompetitive, or you are looking to borrow more money. In that case, you’re going to go through an underwrite anyway, so we might as well look at everything.
What other factors impact eligibility on foreign currency mortgages?
There’s a few things. The residency situation is important. Most applicants we would look at on this basis would be British passport holders, or those with indefinite leave to remain in the UK.
It becomes doubly difficult for a foreign national that doesn’t have indefinite leave to remain and is earning in a foreign currency. It’s not impossible, but again those circumstances make the pool of lenders even smaller.
Where you’re working is also a factor. You might be still based in the UK, working for an international firm and being paid in that currency, or you might be working abroad. That becomes a bit more complicated.
It also leads on to another point – is the property going to be empty, or are your family remaining in the property for 12 months of the year? Is it just one of the income owners that’s going abroad to work?
The currency itself is important, too. Some currencies are accepted more easily than others. These would be the main things I’d be looking at in a situation like this.
Have you helped many clients with foreign income? Can you think of any example cases?
Yes, we’ve had a good number. They’re not an everyday occurrence, so I can’t say we’ve done hundreds of them, but they do come along from time to time.
We’ve had lawyers in international firms who are paid in foreign currencies.We’ve had some clients involved in oil exploration abroad. They’ve been working in Africa and earning in foreign currency. These clients are often working abroad, but their family remains in the UK.
It’s normally the professionals market that this would relate to, and that’s an area we deal in a lot.
We’ve also done some mortgages with international lenders, where a UK citizen or an expat is living and working abroad, earning in a foreign currency, and they’re buying a UK property for when they come back, or for a dependent relative. We did one of those for somebody residing in Germany not too long ago.
What are the benefits of using a mortgage broker? Should I speak to a broker before making an offer?
Absolutely. It is a minefield. Without doubt there is a fairly serious layer of criteria to meet in these circumstances.
You could walk up and down the high street and struggle to find a lender yourself. The challenge is both in finding a lender, and also in how much of your income they will use. Some of them will apply a greater haircut to your income than others, depending on the volatility of that currency. Those criteria are also changing all the time.
It’s not a given that you will get a mortgage in this situation. So, quite simply, using a broker in a case like this will be a godsend. You need to know quickly whether this is even in the realms of possibility.
If it is, your broker can confirm with a good degree of accuracy that a mortgage is doable.
I would certainly suggest speaking to a broker before you put an offer in, if you can. With that added layer of complexity, you’ll want to know where you are.
You don’t want to find that dream home and then find that you can’t get the mortgage you need. That applies in most mortgage cases, but even more so here. A broker can tell you what’s within the realms of possibility so you can go ahead and look at some properties with confidence.
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