Foreign Currency

Mortgages

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Income in a Foreign Currency

Mortgages using income in a foreign currency is a highly nuanced topic area, as every lender has differing criteria as to the type of client and currency they can accept. It’s unsurprising that arranging a mortgage with foreign currency income can be complex, as only a handful of UK lenders are able to accept income earned in a currency other than pounds sterling. There are a number of factors which a lender will consider when income is paid in a foreign currency, which vary hugely from lender to lender.

Which currencies are acceptable?

Just because a lender can accept foreign currency does not mean they will be willing to lend based on every currency in the world; they will either have a red list of currencies they cannot accept, or a green list of the currencies they are only willing to accept. This is due to the volatility of some currencies, whereby they can fluctuate overtime and cause their strength against the pound sterling to decrease, thus increasing the lender’s risk when releasing large sums of money. So it’s important to check which lenders can accept the currency you are earning in.

The lender will also not lend based on your income in the earned currency; they will convert into sterling typically using either today’s exchange rates or the worst exchange rate in the las 5 years. Some lenders may also apply a ‘haircut’ to the salary by using a marginally lower figure for their affordability assessment, which allows for any potential fluctuations and further protects the lender from risk.

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Does my employment type matter?

As a general rule of thumb, there are more lenders who will be happy to consider foreign income for an employed applicant than for a self-employed one. Whilst there may be exceptions to the rule, lending based on self-employed foreign income is extremely complex due to the differing tax systems from country to country, so may often require accounts to be drawn and tax paid in the UK if income is earned in a foreign currency. Typically, lenders will also only accept applicants who are employed by an internationally recognised company, so they can further verify the legitimacy of the income source. Additionally, it will help if your income is paid into a UK bank account or even a non-UK account if the bank is international and well-known as opposed to a small, overseas account.

As with any mortgage, a lender will feel more confident in lending funds to a client who has been employed for a continuous and substantial length of time in a permanent role. However, there are some instances where lenders can accept clients who are non-permanent employees, working abroad for extended periods of time but living in the UK, such as oil rig workers who work outside of a tax jurisdiction.

How do I get a mortgage with foreign currency income?

As with any mortgage application, the strength of your circumstances will improve your chances of being approved, such as having a consistent level of income, no adverse credit and a low debt to income ratio. Lenders will also have differing maximum loan to value caps, however the more deposit you can raise, the higher your chances of securing a mortgage will be, as well as having access to more competitive rates. If you aren’t sure whether your circumstances will meet the criteria for a mortgage if you earn income in a foreign currency, or would like to further discuss your eligibility, get in touch with our specialist lending team today for honest and accurate advice on foreign income mortgages.