You may well have had trouble finding a UK mortgage with overseas income. The majority of lenders in the UK only consider income earned in the UK, paid in pounds sterling, generally because they consider the currency exchange and less familiar employment sector a greater risk.
Income may be harder to verify, with additional checks taking time and resource many lenders just don’t want or need to entertain.
Thankfully there are lenders than can consider a range of foreign incomes
Which currencies are acceptable for a foreign currency mortgage?
Thankfully there are lenders out there happy to consider UK mortgages on UK properties, for income from various countries around the World, it’s just a case of finding the right lender for your circumstances.
Below is a list of some currencies that some UK mortgage lenders consider:
• Euro (EUR)
• US Dollars (USD)
• Yen (JPY)
• Australian Dollar (AUD)
• Polish Zloty (ZL)
• Russian Ruble (RUB)
What are the main considerations for overseas income mortgage applications?
The main areas that impact lending decisions and whether someone earning foreign income would be approved for a mortgage or not are:
- Is the applicant employed or self-employed abroad? (And if self-employed is the company registered in the UK?)
- The currency the income is paid in
- The country the work is carried out in
- The location / name / size of the company / organisation the income is paid from, and if they also have branches in the UK, or if not, whether the company’s accountancy firm does.
- The location / name / size of the bank / organisation account the income is paid into, and if they also have branches in the UK.
- Where the tax is paid (UK or country of origin)
- The length of employment / time income has been paid
- The type of work / stability of the sector applicant works in
- The amount and source of deposit (and which country it is currently held in)
- The other criteria to consider as well as meeting general affordability requirements is:
- Whether or not the borrower has had any adverse credit
- The location of the property, and viability of the “story” to ensure suitable lending.
- The purpose for lending (Residential / BTL / commercial etc.)
- The property and tenure type (flat / house; freehold / leasehold)
Will my employment status be an issue with a foreign earnings mortgage?
For employed workers earning income paid in overseas currency, there are far more lenders available than to those who are self-employed.
In fact, there’s only a small number of more specialist lenders willing to consider overseas self-employed mortgages, presumably because of the increased difficulty in being able to establish and verify actual earned disposable income and calculate reasonable affordability.
Tax systems are completely different country to country, and for a UK lender to effectively understand liabilities and for multiple areas is often too big an ask.
As a result, if self-employed income is earned overseas then lenders will almost always require the company to be domiciled in the UK, with full accounts drawn and tax paid on income as if it were from the UK.
There may be exceptions to this rule for a small number of lenders, taken on a case by case basis, for borrowers with the right business case who can provide enough evidence to satisfy lenders that approval is appropriate.
Will the currency of income earned impact mortgage approval?
When it comes to foreign income to qualify for mortgage, one of the most important initial questions lenders will ask is the currency of the income.
All UK lenders will consider income paid in GBP but only a handful in Euros, fewer in US Dollars, fewer still in Yen or incomes from other less origins.
If you have been declined because your income is paid in any kind of foreign currency, this doesn’t mean there aren’t other lenders out there for you.
How will the location of the work/job activity impact mortgage approval?
If you are looking to get a mortgage with income earned on work done outside the UK, lenders will want to know where and how.
Employment in France / Germany / Spain is far more likely to be approved than someone working in a country further away geographically, particularly if this country is under financial sanction.
This comes into whether the “story” of the situation is feasible or not (I.e. is the borrower going to be resident in the property or leave it unoccupied/let without consent, which would infringe the terms of the mortgage), as well as the strength of that country’s economy and the opinion on whether the income will be sustainable or not.
How will the overseas company I work for impact mortgage approval?
Again this comes down to risk. Lenders are more likely to approve a borrower using foreign income for a mortgage, who is working in a multi-national company with solid reputation in the UK, than for someone working in a spare bedroom of a start-up.
It is far less likely that a large multinational business would put itself or its employees under any scrutiny from a tax or revenue perspective, than a firm that has no ties to the UK whatsoever.
Common examples of approvals come from those who are asked to work abroad in another arm of the business for a short term, such as someone working on production for JCB in their manufacturing plant in China.
Could the way I’m paid impact foreign income mortgage loans?
If you are paid in overseas income in cash, it’s highly unlikely to be approved by a UK mortgage lender without great reason, such as the nature of the risk and difficulty to validate the source of funds. With most lenders the money you earn would need to be paid into a bank account.
If the bank is a recognised UK bank, all the better – Generally if the bank you are paid into is in the UK, or has UK branches, then this is considered lower risk for a UK lender considering overseas income.
If the bank is overseas and you transfer this money into a UK account, then it makes a difference which bank.
Smaller, less known banks may be subject to different regulation, support, and security in certain countries overseas, so are likely to be considered higher risk when it comes to ensuring transfers are timely and legitimate.
If for example, you work in the UK and Spain, for a Spanish company, are paid in Euros into a Spanish account with Santander, that you then transfer to a different UK account, lenders may consider this lower risk, because of the common understanding the bank has of both UK and Spanish markets and tax systems, as well as clear and reliable audit trails.
How the country in which you pay tax impacts foreign currency income mortgages
Most lenders considering overseas income require UK tax to be paid if they are to consider it. If income is earned tax-free in a certain country and is brought back into the UK, then self-assessment may be required to evidence the income earned and pay tax accordingly.
If income is taxed at source overseas then any tax due according to UK law needs to be adhered to.
If no tax is paid whatsoever, then most UK lenders will decline the application, unless there is an acceptable and viable explanation, in which case certain lenders may consider those with a strong business case to lend regardless.
How the length of employment can impact a foreign currency mortgage
As with any type of employment in any currency, lenders consider those in a role long term much less risk than those who have started in a new position.
Generally this is because A) the borrower may not perform well and be fired, possibly within a probationary period, and B) the borrower themselves may not get on in the role and want to leave.
Both outcomes result in a potential period with no income to support the mortgage. Add to this the fact that employment law overseas may be different, and the borrower may not be subject to any compensation or notice periods, as well as different working culture, different markets, languages, and all sorts of other potential barriers that may impact the longevity of a borrower in a foreign company, and it’s easy to see why a lot of lenders consider this a scenario outside of their policy.
Once someone has been in their role for over 12 months however, the risk of this being an issue can be considered far lower, which is why many lenders considering overseas currency as income for a mortgage application here in the UK, require 12 months history in the role (or similar role).
How will the type of work/strength of sector affect a mortgage application with foreign income?
The type of employment impacts lending when based in the UK and paid in sterling, and is no different when the company/work/payment currency is from overseas.
Again every lender is different in what they would consider as “higher risk” employment sectors, but in general professionals working internationally are deemed lower risk than lower skilled or manual jobs.
For instance, someone employed as a part time medical consultant in the US, paid in dollars, may be less risk than someone selling Tulips for a Dutch florist paid in Euros.
Is the amount and source of deposit (and which country it is currently held in) a factor with a foreign earnings mortgage?
It’s not uncommon for those paid in foreign income to also have their deposit held overseas too.
If this is in a recognised bank account with clear audit trail of the build-up of funds, then similar rules apply as to the name/size/location of the bank the income is paid into.
Typically if the bank has UK branches it’ll be OK and be accepted by most lenders, if not then further checks are needed to ensure the funds meet all anti-money laundering requirements.
How will bad credit affect a foreign earned income mortgage?
If there’s previous bad credit showing on your credit file, then this can limit the options to you in the buy to let market.
Below is a list of potential credit issues you may be faced with as a borrower if you’ve ever experienced any of these:
- Adverse credit overview
- Low credit score
- Mortgage Arrears
- County Court Judgements (CCJs)
- Individual Voluntary Arrangements (IVAs)
- Debt Management Plans (DMPs)
Generally, the smaller, less severe, older the issue, and the larger the deposit, the more chance there is of approval.
What else might affect a foreign currency mortgage in the UK?
Multi currency mortgages
There can be very complex requirements if you are intending to pay a mortgage through multiple currencies.
This requires expert advice that the brokers we work with could provide.
The location of the property, and viability of the “story” to ensure suitable lending.
If the property is based in England and Wales there are more lenders available than if it were in Scotland or Northern Ireland.
If the property is based overseas then this is classed as an overseas purchase and really only those lenders considering overseas mortgages will consider applications on overseas products, potentially lent in foreign currency, not the UK mortgage products for UK properties.
The purpose for lending (Residential/BTL/commercial etc.)
For many lenders offering both residential and buy to let mortgages, there can be a completely different set of lending criteria.
Commercial lenders may be more considerate of overseas income as they are also subject to different regulatory requirements.
The property and tenure type (flat / house; freehold / leasehold)
If you are buying / refinancing a traditional brick built house in solid condition then its unlikely you’ll be restricted by any lender due to the property type, tenure or construction material.
Those buying freehold flat or a building with a thatched roof however, may be restricted to the number of lenders that will consider an application, so add to this a borrower with income paid in an overseas currency and the number of lenders will be limited further.