Mortgages With Foreign Income
Getting a mortgage with foreign income can be difficult but not impossible. We’ve got the lowdown on how to make a mortgage with overseas income a reality.
Firstly, do you earn some or all of your income in overseas currency?
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As the world becomes smaller and smaller in a business sense, it becomes increasingly possible to work and earn money all over the world, regardless of where you’re based. While this can be very exciting and open up a lot of opportunities, having a foreign income can make things more complicated when it comes to getting a mortgage.
In this article we’ll look at how to find a foreign currency mortgage in the UK, how different lenders treat overseas income, and how finding the right broker can make all the difference.
Can you get a UK mortgage based on foreign currency?
Yes you can, although it’s not a simple process. Although there are some lenders who will consider mortgages based on foreign income, it’s by no means the majority, and criteria vary significantly between lenders depending on your circumstances and the currency.
In 2016 new obligations were set out for lenders that require them to monitor exchange rates for borrowers lent to based on foregin currency, and warn them if rates exceed set limits. Because of this extra layer of administration and cost, some lenders chose to stop offering foreign currency mortgages, reducing the pool even further.
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How would this work?
The standard process for foreign currency mortgage applications is for all overseas income to be converted first into pounds sterling. This is usually done using a particular exchange rate or average rate, specified by the lender.
To allow for currency fluctuations, lenders will then apply a discount percentage to this income, to give them safe margins for how much they think you can afford to borrow. The discount applied will vary depending both on the lender and on the currency and how stable it is.
For example, let’s assume you earn $100,000 a year from a job based in the US. The first stage will be to convert this into pounds, so let’s say that equates to £88,000 (based on a rate of $1 to 88p at the time of writing – October 2022) for illustration purposes. The lender will then accept a percentage of this – we’ll take 80% as an example – and so will use £70,400 as your annual income in its affordability calculations.
What qualifies as foreign earned income?
Any money that you earn outside of England, Wales, Scotland and Northern Ireland counts as foreign earned income, including money earned from the Channel Islands and Isle of Man. Foreign earned income could be money you earn by working abroad or providing services to companies based outside the UK.
Foreign income could also include foreign investment income, rental income from properties overseas or income from pensions held overseas. Whether or not these other forms of foreign income are counted as income for the purposes of a mortgage may depend on the individual lender as a specialist broker will be best placed to advise.
How to get a mortgage with overseas income
While getting a foreign currency mortgage is by no means impossible, it isn’t straightforward, and anything you can do in advance to be as prepared as possible will be useful.
Here are a few easy first steps to consider:
Find a specialist broker
While most brokers will have a good broad range of experience and access to the whole of the market, what you really need in the case of an overseas income mortgage is a broker with specific experience and contacts within this niche area of lending. They will understand the intricacies of each lender’s criteria and be able to guide you to the right one for you in order to maximise your borrowing potential. Many lenders only accept applications for foreign currency mortgages through an intermediary, so this step really is vital if you want access to the best deals.
Make an online enquiry now and our free broker matching service can help you find the right broker for your situation.
Get your paperwork in order
When it comes to foreign income mortgages, one of the stumbling blocks can be providing the right evidence and documentation, so get as much of this together as you can before you start your application.
This includes evidence of your income, how you’re paid and where that income comes from, as well as anything around duration and terms of employment. If you’re self-employed then you’ll need previous years’ accounts. Think in advance about whether you will need to get any documents translated, as things like this can hold up the process.
Think about your deposit
Most foreign income mortgages will require a deposit of at least 10%, but if you’re able to offer more then this may help to mitigate some of the perceived risk and make it easier to find the best rates. One issue that can occur when your income comes from overseas is that your deposit may be held overseas in foreign currency too.
If this is the case and your overseas bank doesn’t have a UK branch then you may be subject to additional checks to verify the source and security of your deposit.
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Which lenders accept foreign income?
It’s difficult to give a definitive list here as lenders’ criteria are always subject to change and eligibility will vary depending on your broader financial picture.
To give you an idea of the complexity of criteria when it comes to foreign income mortgages, we’ve picked out a few examples here:
- Santander can accept an applicant who is employed and paid in US Dollar, Euro, Swiss Franc or UAE Dirham. The sterling equivalent must be calculated based on a specified average exchange rate and discounted by 25% to allow for currency fluctuations.
- HSBC can potentially accept foreign currency applications in any currency, but only through an intermediary. Depending on the currency you are converting from, income will be discounted by either 10%, 20% or 30%.
- Livemore Capital will consider foreign currency mortgage applications in US Dollar, Euro or Swiss Francs, but only accept 65% of the foreign income for affordability calculations and only when the foreign income is up to 25% of the total income.
Your best option when looking for a mortgage with overseas income is always to use a broker who can research and approach lenders on your behalf, as they’ll have an in-depth knowledge of exactly what they’re looking for and what evidence you’ll need to provide.
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Things to consider
There are many factors that will come into play when applying for a mortgage with overseas income, not just the currency you’re paid in, so it’s important to consider the wider picture too. If you don’t think about your broader financial and personal circumstances you could risk having your mortgage application declined and reduce your future chances of success.
Some things to consider include:
- Where you’re based – For foreign currency mortgages most lenders will require you to be permanently based in the UK, even if you do sometimes have to travel for work.
- Your employment status – Whether you’re employed or self-employed will have an impact on your application as self-employed mortgages are generally seen as higher risk. If you are self-employed, are you registered in the UK and paying tax within the UK?
- How do you prove foreign income for a mortgage – This will depend on how you’re paid and lender specific requirements but will include payslips, accounts if you are self-employed and bank statements.
- The company you work for – Again this comes down to risk, and if you work for a relatively unknown or small foreign company then lenders may want to carry out additional checks or ask for extra information to help support your application.
- The reason for borrowing – Are you buying a home to live in, as a buy-to-let, or for another commercial reason? The type of loan you’re looking for, as well as the type of property you’re buying, can be important factors.
- Your credit history – Although you can get bad credit mortgages, you’ll have more options and get a better deal if your credit history is good, especially when your lender is already taking on the risk of the foreign income. Get copies of your credit reports before you start to make sure you’re in a strong position.
Get matched with the right mortgage broker
If you really want to make your foreign currency mortgage dreams a reality then give yourself the best possible chances of success by teaming up with a broker who specialises in securing mortgages for people in the UK with overseas income. Not sure where to find them? This is where our free broker matching service comes in.
Give us a call on 0808 189 2301 or make an online enquiry now and let us do the hard work. We’ll look at your circumstances, compare your needs against the experience of all the advisors we work with, and arrange a no obligation chat with the person that we think has just the right skills and contacts for you.
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Yes, depending on your other circumstances it may be possible. Northern Ireland is part of the UK and so much of what we’ve discussed in this article will apply, although the number of lenders working specifically in Northern Ireland may be smaller and so it’s more important than ever to find the right broker.
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