In the ever-advancing world we live in, it is possible to work and earn money all over the world, wherever you are based. It is a great opportunity, but it can pose a challenge when getting a mortgage. Luckily, there are options available, but doing your research and knowing your options is important. In this guide, we explain the various options.
Can you get a UK mortgage based on foreign currency?
Yes, It is possible to obtain a mortgage with foreign income, but only a limited number of lenders offer this option. After the implementation of increased obligations in 2016, which required lenders to monitor exchange rates when lending to customers with foreign incomes many lenders discontinued offering mortgages to those with foreign income. The criteria for securing a mortgage with foreign income also varies among lenders.
How is foreign income calculated on a mortgage?
When assessing foreign income for a mortgage in the UK, the lender typically converts the foreign income into pounds sterling a a pre-determined exchange rate. The lender will then apply a margin to cover potential fluctuations in exchange rates and assess the borrower’s ability to repay the mortgage based on their net income in pounds sterling.
For example, let’s say a borrower earns €100,000 per year, and the prevailing exchange rate is 0.9 euros to 1 pound sterling. The lender would convert the borrower’s income to pounds sterling, which would be £90,000 pounds.
The lender may then apply a margin of, for example, 20% to cover fluctuations in exchange rates, resulting in a net income of £72,000. The lender would then assess the borrower’s ability to repay the mortgage based on their net income in pounds sterling.
What counts as foreign income for a mortgage?
Foreign income can refer to any income earned from a source outside of the UK.
It’s worth noting that the specific types of foreign income that a lender will consider can vary among lenders.
Examples of foreign income that may be considered by UK mortgage lenders include:
- Income earned from employment or self-employment abroad
- Rental income from a property located overseas
- Income from investments, such as dividends or interest, earned from foreign sources
- Pension income from a foreign pension scheme
- Royalties or other intellectual property income earned from foreign sources
What is the criteria?
Many lenders require foreign income applicants to have UK residency or citizenship, as well as a permanent job in the UK. The specific eligibility requirements can vary among lenders, but some lenders may require applicants to have:
- Permanent residence in the UK or indefinite leave to remain
- A UK bank account
- Lived in the UK for a certain period of time, typically 2-5 years
- A permanent job in the UK
- Good credit history and credit score
- Demonstrable ability to afford the mortgage payments based on income and expenses
For EU nationals, the eligibility requirements may vary depending on their residency status and the lender’s specific criteria.
What foreign currencies can be accepted for UK mortgages?
While the acceptance of foreign currencies for UK mortgages may vary among lenders, some of the main foreign currencies accepted by UK lenders for mortgages include:
- US Dollars
- Swiss Francs
- Japanese Yen
- Canadian Dollars
- Australian Dollars
- New Zealand Dollars
- South African Rand
- Polish Zloty
What is considered for foreign income mortgages?
Important factors that lenders may consider when assessing a UK mortgage application with foreign income. Some of the primary factors include:
- Employment Status: Whether the applicant is employed or self-employed, and the stability of their income stream.
- Business Registration: If the applicant is self-employed or owns a business, whether it is registered in the UK or overseas.
- Banking: The bank account where the foreign income is paid into, and whether the bank has a presence in the UK.
- Taxation: Where the taxes are paid on the foreign income, and the applicant’s tax residency status.
- Income Stability: The length of time the applicant has been receiving the foreign income, and the stability of the income stream.
- Deposit: The amount of deposit the applicant can put down towards the property purchase.
- Purpose of Purchase: Whether the property is for residential or buy-to-let purposes.
Why does income currency impact my mortgage application?
Your income currency can impact your mortgage application in several ways. Currency fluctuations can make it more difficult for lenders to assess your ability to repay the mortgage, as it can affect the value of your income in UK pounds.
Additionally, taxation laws in your home country can also impact your income and expenses, which can further affect your ability to repay the mortgage.
If you work outside of the UK, lenders may also have additional requirements or restrictions.
How much deposit do I need? | Do I need a larger deposit for an overseas income mortgage?
It’s possible to obtain a mortgage with foreign income with as little as 10% deposit, foreign income applicants may have more options available to them if they can provide a larger deposit.
What documents do I need for an overseas income mortgage
Here’s a list of potential document requirements for overseas Income mortgages.
- ID: This could be a passport or national ID card that confirms your identity.
- Proof of Address: You’ll need to provide proof of your current address, such as a utility bill or bank statement.
- Payslips: If you are employed, you’ll need to provide recent payslips that show your income and tax contributions.
- Bank statements: This will be used to show your income, expenses and savings history.
- Contracts: If you’re self-employed, you’ll need to provide your contracts or agreements that show your income and business details.
- Proof of deposit: You’ll need to show evidence of where your deposit came from and how it was accumulated.
- Audit trail on deposits: If you have large or irregular deposits, you may need to provide additional documentation to show the source of these funds.
- Translation of documents: If your documents are not in English, you may need to have them translated by a certified translator.
How to get a mortgage with overseas income
Here are the typical steps involved in getting a foreign income mortgage:
- Find a specialist broker: Look for a mortgage broker who specialises in foreign income mortgages, as they will have experience working with lenders who accept foreign income and can advise you on your options.
- Get paperwork in order: As mentioned earlier, you will need to provide various documents to support your application, including proof of identity, address, income, and deposit. If your deposit is sourced from outside the UK, you may need to provide additional evidence to satisfy anti-money laundering requirements.
- Apply for an agreement in principle (AIP): Once you have your paperwork in order, your broker will help you apply for an AIP, which is a preliminary decision from a lender stating how much they are willing to lend you based on your financial situation.
Which lenders accept income foreign income?
Many lenders in the UK accept foreign income for mortgage applications, but the specific lenders and their criteria may vary. Some of the major UK lenders that accept foreign income include HSBC, Barclays, NatWest, Santander, and Lloyds Bank.
However, it’s important to note that not all of these lenders may accept all types of foreign income, and their eligibility criteria may differ. It’s always recommended to speak with a mortgage broker or advisor who can help identify lenders that match your specific circumstances and needs.
Best rates for overseas income mortgages
The rates for mortgages with overseas income mortgages can vary depending on various factors such as the deposit level, personal circumstances, and market conditions. However, if you can place your mortgage application with a mainstream or high street lender, the rates offered should be similar to those offered to UK income mortgages.
How much can I borrow on a foreign income mortgage
The amount that you can borrow on a foreign income mortgage will depend on the lender and your circumstances. Usually, it is 4-5 times your income, or potentially increased multiples for those with higher incomes. However, it is important to remember that your income used for the mortgage calculation will be reduced by a specific margin to cover currency fluctuations.
Help improve your chances of success with an overseas income mortgage
- Prepare your documents: Gather all the necessary paperwork and ensure that it is complete and up-to-date, including proof of income, residency, and deposit.
- Check your credit report: Your credit score is an important factor in determining your eligibility for a mortgage, so make sure that your credit report is accurate and up-to-date.
- Ensure an audit trail of your deposit: If your deposit is coming from outside of the UK, be prepared to provide an audit trail of where the funds originated from and how they were transferred to your account.
- Ensure your tax affairs are in order: Lenders will typically require proof that you are up-to-date with your tax payments and may require documentation such as tax returns or tax certificates.
- Consider a larger deposit: Having a larger deposit can increase your chances of getting approved for a mortgage and may also lead to better interest rates and terms.
How can a mortgage Strive Mortgages help
Working with a mortgage broker like Strive Mortgages who specialises in overseas income mortgages can help in several ways:
- Finding suitable lenders: They have knowledge of which lenders are more likely to consider applications from those with foreign income, and can help you find a lender that is more likely to approve your mortgage application.
- Preparing documents: They can help you get all the necessary documents in order, including evidence of your income, your deposit, and your identity.
- Providing advice: A good broker will take the time to understand your unique circumstances and provide tailored advice on how to improve your chances of getting approved for a mortgage.
- Submitting the application: A broker can help you complete the mortgage application process, including filling out the paperwork and submitting the application to the lender.
- Negotiating rates: A broker may have relationships with lenders and can negotiate on your behalf to get you a better rate on your mortgage.
If you have income from overseas and you’re thinking about taking out a mortgage, get in touch with one of our overseas income mortgage experts.
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