What happens when you’re employed outside the UK but want to purchase or re-mortgage a UK home?
It used to be that foreign currency mortgages catered for clients wanting to borrow in a currency other than GBP. However, it now includes mortgages where the income or repayment for the mortgage is earned outside the UK.
In other words - if the income you are using to pay a mortgage is derived in a foreign currency or your repayment strategy for that mortgage is in a foreign currency, then your mortgage is a foreign currency mortgage. This is the case even if the mortgage itself is lent in GPB and secured against a UK asset.
Most high street lenders no longer offer this type of mortgage but there are a few who will, along with several offshore lenders. There are, however, some issues to be prepared for:
All the banks prepared to lend a mortgage to a client earning income in a foreign currency will have a specific list of currencies they will be able to accept. For example, one high street lender will support a client earning income in Dubai if the income is in USD but will not lend to the same client if the income is paid in AED.
2. Loan to value
You may be able to borrow but due to the currency risk a bank may require you to put a larger deposit down. This is not always the case, but it is something to be aware of.
3. Stress test
This is the main issue when lending in foreign currency. Some of the lenders take your Gross annual income then transfer this into GBP (using specific exchange websites). They will then reduce your gross income by up to 25% to reflect potential currency fluctuations and the resulting loan to income multiples are based on that figure. There are lenders that will not take this ‘haircut’ from your income but it depends on the currency you are paid in.
The good news is these mortgages both residential and buy to let, are available whether you live in the UK and work abroad or if you live and work abroad.
The best advice I can always give, is get in touch and seek advice.