Foreign Income Mortgage

When purchasing property in the UK, individuals with foreign income may find it challenging to secure a mortgage. 

However, with the right knowledge and guidance, getting a foreign income mortgage becomes more manageable.

Here’s a comprehensive guide to foreign income mortgages in the UK, covering everything from eligibility criteria to application tips.

What is a Foreign Income Mortgage?

A foreign income mortgage is a type of home loan designed for individuals who may be living abroad and earning income overseas within that native currency who wish to buy property in the UK. 

These mortgages consider income earned outside the UK as a basis for loan approval, allowing non-UK residents to invest in British property.

For example, if you work in Dubai and earn Dirhams (or in New York and earn US Dollars), you may be eligible for a foreign income mortgage in the UK using that income for affordability purposes. 

However, it’s important to note that the entire salary amount you earn usually won’t be considered for mortgage purposes.

Let’s illustrate with an example. 

Suppose you earn $100,000 per year in the US; this converts to around £78,000 at the prevailing exchange rates. 

Then, around 80% of this amount will be considered your annual income for mortgage purposes in the UK. This is a basic example and a more complex calculation will likely be conducted by the lender when considering foreign income. 

What Income Is Considered Foreign Income For Mortgage In The UK?

Any money earned outside of the UK is considered foreign income; this could be money earned by working abroad, providing services to foreign organisations, income from foreign investments, overseas rental income, etc. 

Eligibility Criteria For Foreign Income Mortgage In The UK

To qualify for a foreign income mortgage, applicants typically need to meet specific eligibility criteria, including:

1. Income Source: Evidence of stable and regular income from a recognised source.

2. Credit History: Demonstrable good credit history, preferably in the UK rather than applicant’s home country.

3. Deposit: A substantial deposit, often higher than for standard mortgages.

4. Residency Status: Proof of residency/eligibility in the country where the income is generated.

5. Currency Exchange Risk: Lenders may consider currency exchange risk when assessing eligibility.

Currency Considerations For Foreign Income Mortgage

Foreign income mortgages often involve dealing with different currencies, which can introduce currency exchange risk.

Lenders may require applicants to mitigate this risk through various means where possible 

UK Lenders Who Accept Foreign Income For Mortgage

To be fair, it’s tough to give a concrete list of lenders here, as eligibility criteria for such mortgages is always changing and depends a lot on the borrower profile. Please note foreign income mortgages are very specialist type mortgages. 

Still, the following lenders are known to offer foreign-income mortgages:

1. Santander

Santander accepts applications from people earning in Dollars, Euros, Francs, or Dirhams. It also requires that the pound equivalent be calculated using a pre-determined exchange rate and discounted by 25% to account for currency fluctuations.

So, if you live in Dubai/UAE and want to buy a property in the UK, this lender may potentially be suitable for you as an example.

2. HSBC

Another known lender, HSBC, accepts applications for income in any foreign currency but requires that you operate through an intermediary. 

Based on the currency being converted, the amount is discounted by 30%, 20%, or 10%.  

Remember, working with an experienced broker who is well-versed in the topic is the best way to get a good deal and secure a mortgage on foreign income. If you’ve any questions, feel free to contact us.

Factors To Consider When Applying For a Mortgage With Foreign Income

Apart from the currency you’re earning in, several other factors also play a role in determining the final outcome of your application. Some of the aspects you need to keep in mind are:

• Where you’re actually based in a foreign country  
• Whether you’re employed with a foreign company or working as a self-employed contractor
• Your proof of income
• The type of mortgage, i.e., buy-to-let, residential, or commercial
• Interest rates (here, it’s essential to compare rates from multiple lenders and select the best option)
• Being aware of fees and charges, such as valuation fees, early repayment fees, etc.
• Any associated legal implications of buying property in the UK
• Tax processes and requirements 

Limitations To Be Aware Of When Applying For Foreign Income Mortgage

The very first limitation that you need to know about is that incomes in certain currencies might not be considered by lenders for foreign income mortgage. 

Each lender that allows foreign income mortgages will have specific criteria on what currencies they can accept. 

Another aspect that lenders often consider is the size of the employer. If you’re working with an MNC that has a presence in multiple nations, including the UK, this would give your application an edge over working with a small company that can’t be easily located.

The location of the employer is also essential, as employers in developed nations with stable economies are considered more suitable. The amount of time you spend abroad also plays a role in some cases.

The bottom line is that each lender has its own rules that you must fulfill before being approved for a mortgage.

Frequently Asked Questions (FAQs)

1. Is it possible to apply for a foreign income mortgage in the UK if I’m self-employed or own my own business overseas?

Yes, self-employed individuals and business owners earning income abroad can still be eligible for a foreign income mortgage in the UK. To verify your income, you may need to provide additional documentation, such as business financial statements and tax returns.

2. Can I use rental income from properties overseas as part of my application for a foreign income mortgage in the UK?

Yes, rental income from properties overseas can often be considered as part of your total income when applying for a foreign income mortgage in the UK. You’ll need to provide evidence of rental agreements and rental income to support your application.

3. Will Brexit impact my ability to apply for a foreign income mortgage in the UK as an EU citizen?

Brexit may introduce some changes to mortgage regulations for EU citizens, but many lenders still offer foreign income mortgages to EU citizens living abroad. It’s essential to stay updated on any changes in regulations and consult with mortgage advisors for the most accurate information.

4. Can I apply for a foreign income mortgage in the UK if I’m a non-UK resident but plan to become one in the future?

Yes, some lenders may consider applicants who plan to become UK residents in the future for foreign income mortgages. However, eligibility criteria may vary, and it’s essential to discuss your specific circumstances with lenders or mortgage advisors.

Your home may be repossessed if you do not keep up repayments on your mortgage.

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.