Foreign income and currency mortgages

A foreign income mortgage is a UK mortgage where some or all of the income used for affordability is paid in a currency other than sterling. It is used by foreign nationals living abroad, British expats and UK residents paid by an overseas employer. Monthly payments are made in sterling, so lenders allow for exchange rate risk.

Some lenders call these foreign currency mortgages, though the loan itself is usually still in sterling. A small number of lenders offer loans in other currencies, which works very differently and suits a narrow group of borrowers.

Lenders usually convert foreign income to sterling at a recent exchange rate and then reduce it by a set margin, sometimes called a haircut, to allow for the currency weakening over the life of the mortgage. The size of the reduction varies by lender and by currency, and less stable currencies are reduced further or not accepted.

Some lenders accept only a short list of major currencies, while others accept a wide range. Income paid in a currency pegged to another may be treated like the currency it is pegged to. Because each lender's approach differs, the same salary can support quite different loans.

Overseas pay packages often include housing allowances, school fees, cost-of-living payments, bonuses and tax-free income. Lenders treat each of these differently. Some count allowances in full if they are contractual, some count part, and some ignore them. Bonuses are often averaged over two or more years, and only regular payments are usually counted.

Self-employed borrowers and company owners paid in a foreign currency need accounts or tax returns, often covering two or more years and sometimes prepared by an accountant the lender recognises. Income from overseas rental property or investments can be accepted by some lenders with evidence that it is regular.

Buyers who are not UK resident face extra checks on residence and nationality as well as income, explained on the non-resident UK mortgages page.

UK residents can also be paid in a foreign currency, for example by an overseas employer, through international contracts or from a pension abroad. Lenders apply the same currency adjustments, and some treat UK residents with foreign income more favourably than borrowers living abroad, because the borrower's address, credit history and bank account are already in the UK.

Since 2016, UK rules on foreign currency mortgages have required lenders to take extra care where the income and the loan are in different currencies, which is one reason lenders apply a buffer to foreign income.

Lenders usually ask for payslips, an employment contract, bank statements showing salary paid in, and tax returns or accounts for the self-employed. Documents not in English need a certified translation. Some lenders verify income directly with the employer, and others ask for a letter confirming the role, salary and length of contract.

Lenders also check credit history, which can be limited in the UK for borrowers who have lived abroad. Some accept overseas credit reports, while others rely on bank statements and a larger deposit.