In This Article
What is a foreign income mortgage?
A foreign income mortgage is a mortgage that is taken in the UK but allows income generated and paid in a different currency to be taken into consideration towards the affordability assessment.
For example, if you have a couple where one applicant works for a company that is based overseas, or the applicants spend most of their time overseas. With many of these employers, the applicant may receive their income in a currency such as US dollars or Euros.
Your mortgage adviser will need to get a full understanding of your situation, where the income is generated, the amount received and more to be able to provide you with guidance as to which lenders may accept you.
Your mortgage adviser will need to know about your credit history. To get a copy of your credit file, you can visit Check My File for a free trial.
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Do all lenders accept foreign income toward the mortgage?
Not all lenders accept foreign income mortgages, most insist that income is generated in the UK and paid in sterling.
The ones that do offer mortgages for people paid in foreign countries always need to know more about the situation to be comfortable that the income is sustainable.
They need to know what you do for a job, how long you have been there, where you work, details of the employer and so on.
When you discuss your situation with an experienced mortgage adviser, they can then look for the most suitable lender based on your scenario.
Do foreign income lenders accept foreign income from all countries?
Even with the lenders that can accept foreign incomes for affordability purposes, many will have a list of the countries that they can accept the incomes from and ones that are not acceptable to them.
For instance, the lenders that accept foreign incomes will likely have no issues with an applicant being paid in Euros. This means that a person working for a company based in Germany, France, Spain etc would be acceptable to that lender.
There will likely be other countries however where the lender cannot accept income from. These may be the less developed countries, ones where their currencies are higher risk or countries that are on the sanctions list.
Your mortgage adviser would be able to talk with the lenders to find out their position on incomes from certain countries.
Can there be limitations on foreign incomes that can be accepted?
Lenders that offer foreign income mortgages still have their criteria to meet when assessing a mortgage application. The details of the foreign income will be assessed to make sure the lender is comfortable with the overall situation.
For instance, if an applicant is wishing to include a foreign income, the size of the employer will make a difference with some lenders. If an applicant works for a global company with a large presence that the underwriter can see, this would give them more comfort than a small business overseas that they cannot find.
As a result, some lenders require the business to be large enough to do their due diligence.
The location of the employer is also important to most lenders. If the company is based in a developed country, this will make a big difference versus an application that works for a country in an undeveloped country with a volatile economy.
The amount of time that the applicant is out of the country will also be taken into consideration. If the applicant works full-time abroad and rarely returns to the UK, that will also result in some foreign income mortgage lenders not taking the application.
Each lender has its own rules and these can change over time so always best to consult a professional mortgage adviser.
What is a ‘haircut’ on a foreign income mortgage?
When a lender talks of a haircut on foreign income, this means a certain percentage that they deduct the income for caution.
For example, if a lender offers mortgages for people paid in US dollars but gives the income a 20% haircut, they would use the exchange rate at the time to convert this income and then use 80% of it.
If for instance, the applicant is earning US$100,000, and the exchange rate at the time was 0.8 GBP to 1 USD, this would be an income of £80,000. With a 20% haircut, this would mean the lender uses £64,000.
Not all lenders give foreign income a ‘haircut’ and they all use their calculations so the above is just an example.
To find out how lenders would treat your income, speak with a qualified mortgage adviser.
Can you get a buy to let mortgage using foreign income?
It is possible to get a buy to let mortgage for people paid in a foreign currency. Some buy to let mortgage lenders do not even need you to have a separate income from buy to let investing at all. Read more: Buy To Let Mortgage With No Income.
This is not the case with all buy to let lenders though. Some will require you to have a minimum earned income in UK sterling, such as £25,000.
If you were living offshore full time, this may make a big difference with lenders considering you an ex-pat if you are from the United Kingdom. There are still options for these people but again, not all lenders offer these mortgages and rates can be higher.
Your mortgage adviser would be able to recommend a lender accordingly once they know more about your income, residency, the property, expected rent, deposit etc.
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It is possible to get a foreign income mortgage but not all lenders accept these. Who you work for, where you are based and the currency you are paid in are all taken into account.
When you are thinking of taking a mortgage with foreign income, it is best to speak with an independent mortgage adviser who has access to the entire market due to the limited number of lenders offering mortgages on these terms.
If you would like I NEED ADVICE to match you with a mortgage adviser with experience in foreign income mortgages, please complete the contact form.