UK Mortgage Foreign Income
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UK Mortgage Foreign Income (Part 1)
Can I get a UK mortgage based on foreign currency? How does it work?
Yes, you can absolutely get a mortgage if you receive foreign income. We do a lot of this type of lending at Huxmor. A broker needs to gather the correct information from the client and also to know the mortgage market and lenders really well.
It’s a little bit more complex than a normal mortgage, where your income is just in Great British Pounds.
Why can it be difficult to get a UK mortgage on overseas income?
It can be more difficult for multiple reasons, but the main thing is that most high street lenders are restricted to accepting pounds. This leaves clients in the dark on what to do and who to approach with income from another country.
But there are certain lenders that can offer mortgages using all sorts of different currencies.
There’s increased administrative underwriting and criteria to hit, and it’s slightly higher risk for lenders. It’s fairly obvious, then, that there will be more due diligence.
Are there plenty of lenders that accept foreign income? Do UK lenders apply stricter criteria for mortgages with income from high-risk countries?
There are a good number of reputable lenders that accept foreign income. The most suitable lender will depend on the customer’s situation and the currency their income derives from.
The underwriting is stricter because there are a few extra hurdles to jump over. Most lenders apply what we call a ‘haircut’ on your foreign currency income, of between 10% and 25% depending on the currency. The reason is that there’s added risk for these banks in giving you a mortgage.
Do I need to declare my foreign income?
There are absolutely no exceptions on this. Every penny earned abroad in foreign currency must be declared.
Can I get a UK mortgage if I work abroad and have foreign income?
Yes, it’s definitely possible. As you can imagine, lots of expats work abroad and want to purchase a home or a rental property in the UK. They might be thinking of a return in the near future, or they just love the country they come from.
It’s best to speak to a broker because lenders are quite specific about where you’re living, how long you’ve been there and, if you’re buying a home in the UK, when you’re likely to come back.
Which currencies are accepted by UK lenders?
Lots of currencies are accepted. The most common ones are US dollars, euros, Swiss francs, dirhams and Australian dollars, for example.
But there are many more that can be used. If you listen to this and I didn’t just mention a currency you’re earning in, don’t be worried. There are lots of options. Just speak to a broker, because it is quite specific.
Are there any common foreign currencies that aren’t accepted by UK lenders?
More exotic or unstable currencies can be quite difficult to find a bank for. Lenders may need you to have a higher deposit or they might reduce affordability for those currencies – or they could just reject you. Again, it’s really important to find the correct lender for your circumstance.
How does it work for a joint mortgage where only one of us has foreign income?
That’s fine. Lenders only treat the foreign earning partner’s income differently. Lenders in this space support this kind of joint application all the time.
The fact that one applicant has an income in pounds sterling is actually a real positive. It’s less administration for that lender, that income will not get a haircut, and affordability won’t be reduced because of the currency.
What if I’m self-employed and have a foreign income?
It’s possible to get a mortgage, but the requirements are more detailed. You’ll need to have at least two years’ foreign tax accounts and extra documentation to go with that.
Lenders will still apply their reduction buffers, because of the risk of the currency fluctuating against the pound.
What if I have bad credit and foreign income? How does that affect the mortgage process in the UK?
For foreign income mortgages you do need a strong credit profile. Bad credit makes a standard mortgage difficult, so it’s harder still on a mortgage that’s already more complex.
Some lenders may refuse you, while others will charge higher interest rates or ask for bigger deposits. It’s also worth mentioning that you need a UK bank account to pay the mortgage payments from. Most lenders won’t accept mortgage payments through non-UK bank accounts.
Have you got anything else to add before we return with part two?
It’s important to speak with a broker, because we could save you a lot of money in this area. By getting the correct lender, you’ve got a much greater chance of achieving your goals, so get a broker on board.
Key Takeaways:
- It is possible to get a UK mortgage with foreign income, but it’s more complex than with income in Great British Pounds.
- Most high street lenders are restricted to accepting pounds, but there are other lenders that can accept various currencies.
- Lenders often apply a ‘haircut’ (10-25% reduction) on foreign currency income due to increased risk.
- All foreign income must be declared, and a strong credit profile is essential for foreign income mortgages.
- Speaking with a mortgage broker is highly recommended to navigate the complexities and find the most suitable lender.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
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We won’t only guide clients through the mortgage process but offer long lasting professional relationships for any future needs or advise.
UK Mortgage Foreign Income (Part 2)
What kind of deposit should I have in this scenario?
You can expect to pay a higher deposit than a standard UK mortgage. Between 15% and 20% is the usual minimum, based on the property value.
For Buy to Let properties you should expect to need 25% to 40% of the property value, and possibly more in certain circumstances. It obviously varies hugely on your situation, needs and goals.
Does it make a difference if I’m a first-time buyer with foreign income?
It can have a slight impact. If you’re a UK resident with a good deposit and credit, the process shouldn’t really be affected.
But if you’re an international client purchasing your first home or Buy to Let, the risks to a lender in offering you a mortgage could be higher, depending on the strength of your proposition.
For a first-time buyer with a high income and a good deposit, the process should be straightforward.
Can I purchase a property as a Buy to Let with foreign income?
This is totally possible, but typically requires a slightly higher deposit than a standard mortgage in the UK. It can be up to 40% for non-residents, for instance.
Rates are also a little higher, and lenders prefer you to purchase a standard flat or house over more complex HMOs (houses in multiple occupation) or student-let properties.
Should I try the lender that I have my bank accounts with first?
You can, of course. But many high street banks won’t accept foreign income or overseas earners. It’s as simple as that.
A broker is likely to find you a good option more quickly, with a lender who is actually going to get the job done.
How long does the application process take if you have foreign income?
It often takes a little longer than a standard mortgage, due to the extra documentation and criteria qualifications.
The banks generally have to complete a lot more due diligence on the application. For first-time foreign income applications, you can expect it to take several weeks – certainly not days.
How does the remortgaging process work? Any differences?
Similar to a new mortgage, there’d be additional focus on your documentation for foreign income. Lenders may apply a currency buffer reduction or ‘haircut’ on your income for affordability.
If you’re an existing customer, having a good payment record will obviously smooth the process and make things quicker for you.
What other factors impact eligibility on foreign currency mortgages?
If your income is derived from a volatile currency, lenders might discount more towards your affordability and deposit sizes may be bigger. Credit history is also obviously a factor.
If you’re self-employed, you would need two years of tax returns and strong documentation to cover everything off. These are all factors to consider before approaching a bank – and certainly before finding a property to buy.
Have you helped many clients with foreign income?
Yes, I’ve helped hundreds of customers with foreign income. In fact, I’m helping some right now, who are foreign nationals and expats.
I’ve helped clients purchase a home for their family, because they’re planning on coming back to the UK after working abroad. People are also looking to purchase investment properties from all over the world.
We’ve used many different lenders from high street banks to private banks. It all depends on the customer’s situation and how complex it is.
What are the benefits of using a mortgage broker like Huxmor? Should I speak to a broker before making an offer?
It’s important to know that a broker can give you access to a wider pool of lenders beyond your bank. We will also guide you through the tricky affordability questions and criteria that the lenders have.
The majority of lenders will take a haircut off your income of 10% to 25%, depending on which currency your income is in.
Speaking with a broker before making an offer on a property means you’ve got real certainty that you can afford to buy. It helps you avoid any unwanted disappointment.
What else do we need to know about getting a mortgage with foreign income?
It’s important for customers to know that they just need to talk to a broker – and ideally us. We’re happy to help. This is a really important area that’s complex and varied, so the more help you can get, the better.
Key Takeaways:
- You can expect to pay a higher deposit for a UK mortgage with foreign income, typically between 15% and 20% for a standard property, and 25% to 40% for Buy to Let properties.
- Being a first-time buyer with foreign income can slightly impact the process, but a high income and good deposit can make it straightforward.
- Purchasing a Buy to Let property with foreign income is possible but usually requires a higher deposit (up to 40% for non-residents) and may have higher rates. Lenders often prefer standard flats or houses over more complex HMOs or student-let properties.
- Many high street banks do not accept foreign income, so a mortgage broker is likely to find a suitable lender more quickly.
- The application process with foreign income often takes longer than a standard mortgage due to additional documentation and due diligence.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST BUY TO LET MORTGAGES.