UK Mortgage on Foreign Currency Income: How It Works

If you are paid in dollars, dirhams, euros or any other currency, UK lenders will usually reduce the income they count, to allow for exchange rate risk. This guide explains how that works, why some lenders will not take foreign income at all and how to plan around it. It is part of our series on UK expat mortgages.

This guide is general information, not personal advice or a mortgage recommendation. The percentages quoted come from broker guidance and vary widely, so treat them as ranges and check the current criteria with a specialist.

Sterling banknote, representing a UK mortgage on foreign currency income

The short answer

Many specialist lenders accept foreign-currency income, but they usually apply a discount, often called a haircut.
Brokers commonly report discounts in the range of about 10% to 25%, depending on the lender and the currency.
Some lenders only accept certain currencies, or none at all.
The currency risk does not disappear. You earn in one currency and repay in another.

Why lenders discount foreign income

A UK mortgage is in sterling. If your income is in another currency, a fall in that currency against the pound makes repayments more expensive for you, even though your pay has not changed. Lenders protect themselves by counting only part of your income, so that the loan still works if the exchange rate moves against you.

A worked example

This example uses invented figures and an invented discount. It is not a quote.

You earn the equivalent of £100,000 a year in US dollars. The lender applies a 20% discount, so it counts £80,000. If it lends four and a half times counted income, that is £360,000. A UK resident earning the same £100,000 in sterling, with no discount, could be offered £450,000 on the same multiple. The currency discount alone costs you £90,000 of borrowing in this example.

Different lenders discount by different amounts, so the same income can produce very different offers. That is one reason to compare several rather than going to the first lender that says yes.

Which currencies lenders accept

Lenders have a list of income currencies they will take, and the major currencies are usually accepted more easily than less common ones. Some lenders limit how much of your income can be in a foreign currency, and a few will not consider foreign-currency income at all. Always check the lender’s currency list before you invest time in an application.

The deposit and the exchange rate

The same issue applies to your deposit. A deposit held in a foreign currency changes in sterling value between your offer and completion. Lenders may ask for evidence of where it came from and may want it converted to sterling before completion. Our guide to deposit and income rules for expat mortgages covers what documents they ask for.

A sterling mortgage or a foreign-currency mortgage?

Most UK property is bought with a sterling loan. A few lenders offer loans in another currency, which can match your income, but broker guidance notes that regulation has made many UK lenders cautious about foreign-currency mortgages. If you do borrow in a foreign currency, remember that exchange rate moves can raise the sterling value of what you owe. Take advice before you do.

Ways to manage the currency risk

Keep a buffer. Hold some savings in sterling to cover repayments if the exchange rate moves.
Use sterling income where you can. Rent from the UK property, or a UK pension, is paid in the currency you are repaying.
Borrow less than the maximum. A lower loan leaves room if the currency falls.
Compare the all-in cost of converting money. Our guide to currency risk on expat savings explains margins, multi-currency accounts and forward contracts.

Which expats this affects most

It matters most for people paid entirely in a foreign currency, such as contractors and employees in the Gulf, Asia or the US, and for anyone whose income and deposit are both in different currencies from the loan. If part of your income is already in sterling, lenders may treat that part more favourably. Where timing is tight, some borrowers consider short-term bridging finance or a secured loan, which come with their own costs and risks.

Common mistakes

Working out affordability on your full foreign income, not the discounted figure.
Applying to lenders that do not accept your currency.
Ignoring what happens to your repayments if the currency falls.
Leaving the deposit in a foreign currency up to completion with no plan.
Borrowing the maximum on the strength of a strong exchange rate.

Frequently asked questions

Can I get a UK mortgage if I am paid in a foreign currency?

Often yes, with specialist lenders, but they usually discount the income and some accept only certain currencies.

What is a currency haircut?

A reduction applied to your foreign income when a lender works out affordability, to allow for exchange rate moves. Brokers commonly report about 10% to 25%, but it varies.

Is it better to borrow in sterling or my local currency?

Most UK mortgages are in sterling. Borrowing in another currency can match your income but carries exchange rate risk on the debt, so take advice first.

Does my deposit currency matter?

Yes. Its sterling value can change before completion, and lenders may ask for evidence of its source and how you will convert it.

Will rent from the UK property help?

Sterling rent can help you repay a sterling loan, but lenders do not always count it as part of your income, so check their approach.

This article is for information only and is not financial advice or a mortgage recommendation. Exchange rates move and cannot be forecast, and lender criteria change. Take regulated advice before you borrow, and remember that your home may be repossessed if you do not keep up repayments on a mortgage.

A UK Mortgage on Foreign-Currency Income: How Lenders Treat It