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Mortgage in Euros

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Mortgage in Euros

Mortgage in Euros

David Walsh talks to us about whether it’s possible to borrow on a UK mortgage if you’re paid in euros.

How can you get a UK mortgage if you’re paid in euros?

The process is similar to being paid in sterling, but we have to focus on lenders that accept that currency. We also need to allow for any reductions or ‘haircuts’ they apply, to account for fluctuations in exchange rates.

So it’s a similar process as a customer. There are just a few considerations for us as brokers around which lender we use and how that income is treated.

Who can take out a mortgage in the UK when paid in euros?

People in this situation are often based in the UK and looking to get a mortgage on a UK property, but their salary is denominated in euros. We frequently find this where a company is headquartered in Europe.

Those cases are usually straightforward, if everything else on the case is standard. We just have to look at the exchange rate from euros to sterling at the point of making an application.

Some lenders might apply a haircut to account for currency fluctuations. Santander, for example, will accept euros but only use 75% of the income for affordability assessments. Others, like Natwest, will use 100% of it – it just depends on the lender. [podcast recorded in May 2024]

We also sometimes deal with people who are looking to get a mortgage on a UK property but are working overseas. If they’re in Europe they might be paid in euros. There are a few more considerations if you are working overseas as well as being paid in a foreign currency.

For example, lenders may require that your main residence is in the UK. If you’re working in Europe during the week and come home to the UK on weekends, that’s fine. Or, you might be working overseas for a certain period, but the property you’re mortgaging is in the UK and that’s going to be your main residence.

It is also fine if you’re working overseas but your family is based in a property in the UK. There are a few scenarios where this can work.

Which lenders accept euro income?

Of the high street banks, three key lenders accept it: Natwest, HSBC and Santander. There are also other more specialist lenders, like private banks.

But for the majority of the cases, people fit with the main lenders. We look to the high street first and foremost, because larger banks often offer more favourable terms because of their size and scale. They can offer better rates than elsewhere.

We’d only go away from the high street to more specialist lenders if what we’re looking to do doesn’t fit within their policy.

Private banks typically only deal with people borrowing more than a million, but if we have a case like that which doesn’t fit high street terms, we can go somewhere more specialist.

It might be that when we come to arrange the mortgage, there’s a lender that’s absolutely the best on rate, but doesn’t accept foreign currency income. But generally, the high street banks are fairly close on pricing. They’re always fairly competitive. So even if you aren’t getting the absolute best rate in the market, with a choice of three major high street banks you’re never going to be far off.

Is it hard to get a UK mortgage if you’re paid in euros?

It’s pretty straightforward. It doesn’t vary hugely from a standard mortgage application if you’re based in the UK. It’s just about the calculations.

We look at the affordability assessment and take into account the potential reductions in income used – that haircut percentage I mentioned earlier. In terms of documentation and evidence, that’s pretty standard.

If you’re working in Europe earning euros, there might be some additional hoops to jump through. One could be getting a credit report from a local referencing agency. That’s something lenders might require, depending on where you’re based and if you have any kind of credit footprint in the UK.

If you’re just on secondment for a short period and the lenders can do a UK search and find sufficient history on you to satisfy their credit requirements, you won’t need a local credit report.

But if you’re based overseas permanently and don’t have much history here in the UK, a foreign credit report might be needed. So that’s an extra bit of work to do.

It might be that your pay slips are in a foreign language and you might have to get those formally translated. There might be a bit of a cost there.

Again, it’s nothing major or too onerous. It’s what you’d expect really, as a lender’s going to need to read your payslips. They need to be responsible and make sure you can afford to borrow this big commitment.

What if you are living in the UK and looking to buy a property in Spain, France, Portugal or Italy? How would this work?

It depends on how much you’re borrowing. Some specialist UK-based lenders will accept properties that are overseas. It’s quite niche and there aren’t many lenders in that space.
Speak to a specialist broker like us and we’ll see if we can place it.

More often than not, if it’s not a huge loan you might find you have better luck engaging with banks local to the property. Whether we can do it with a UK lender depends on a lot of things – how much you’re borrowing, your situation and where the purchase property is located.

In my experience, we have better luck with a lender local to the property. But come and have a chat with us and we’ll point you in the right direction.

How does my employment status affect mortgage applications as a euro-earner?

If you’re a permanent employee, life’s a lot easier. We could just look at pay slips for your income and any additional pay like bonuses. If you’re self-employed, it depends on where you pay your tax.

If you’re working overseas earning euros, but you pay tax in the UK as a tax resident here, that’s relatively straightforward. We just look at your UK tax documents – your self-employed tax returns, tax calculations and tax year overviews. Those are all documents we can get from HMRC. The conversion’s already been done, so everything on there is in sterling.

If you’re self-employed overseas and you pay tax overseas, that’s a lot more complex. Lenders might want to see that you’ve been audited by a fairly major accountancy firm – and that’s going to cost an awful lot of money.

Which documents would I need to show lenders when applying for a mortgage in euros?
Typical documents required would be evidence of ID, such as your passport; evidence of income, with your payslips or tax returns, and evidence of any additional pay, with bonus payslips or P60s.

We also want to see evidence of your outgoings via your bank statements for the last three months. Those are all standard documents. There might be additional things if you’re based overseas, but that covers 90% of cases, I would say.

What are the main factors that affect overseas income mortgage applications?

A key factor is where you’re based. The countries acceptable to the lenders that deal with overseas applicants do change. If you’re in mainland Europe, you’re probably going to be fine, but it can change.

There are obviously sanctioned countries that are a no-go. If you’re based in Russia, for example, at the moment that’s just not going to work.

If you’re working somewhere else and you want to find out, just get in touch. Lenders such as HSBC for example, have a matrix that’s updated regularly in terms of countries that they accept residence in, as well as currencies and the haircut that’s applied. We’ll give you an updated answer on that.

What impact could my pay have on the mortgage?

Income is obviously a big factor because it determines how much you can borrow. If you’re earning more, you have better potential to repay that capital.

If we’re talking specifically about euro income and how that affects an application, then the key thing is the haircut I mentioned earlier. Of the three lenders we look at for euro income, your circumstances might mean that one lender is more favourable. It might be that their loan to income ratio is a bit higher, or they’re willing to accept properties with annexes… it could be anything.

So if we’re narrowing down a lender for a certain reason, we’ve got to look at how they manage that euro income. It might be that they don’t take a haircut, or, for example, Santander will always take 25%, which is quite significant. If we can only use 75% of your income to borrow against, that takes a chunk out of what you can actually borrow.

Another consideration is fluctuation in exchange rates. Most lenders will look at a straightforward exchange rate on the day of application. It’s our job as the broker to run that calculation – we make sure that the affordability model matches up with that exchange rate and any haircuts applied.

Natwest don’t take a haircut, but you might find their affordability model means you can borrow less even without a haircut applied. It all comes down to individual circumstances. A broker will run those numbers for you and tell you who can do what for you.

Can I still get a mortgage in euros if I have bad credit?

It depends how bad. Credit referencing is very murky. The score you’re given by Experian or Equifax doesn’t necessarily translate into what the lender will look at. They have their own referencing models and will weight certain things more heavily than others.

There are some black-and-white policies. For example, a lender may not accept someone with any defaults greater than a set amount within the last six months. We can look at your credit report and see if anything will result in a definite no from a lender. Other things might technically fit within their policy, but it all comes down to the individual score.

The only way to be certain whether a lender will be happy or not is to run a Decision in Principle with them. We provide all your details to them, they run a credit search and then come back with yes or no.

In some cases, it might be a yes, but only up to a certain Loan to Value. Bad credit is quite a difficult one to determine. It depends what your credit looks like and how recent any issues were. We need to look at the credit report and do a Decision in Principle.

Can you get a mortgage if you are self-employed and paid in euros?

Yes. It is a lot more straightforward if you’re paid in euros and you pay your tax in the UK. If you’re paid in euros and pay your tax elsewhere, it may be possible, but there’s going to be a lot more complexity to it. Like most of my answers, it comes down to the circumstances of the individual.

Can I remortgage if I’m paid in euros?

Yes – there’s no difference between remortgaging and purchasing with regards to how the euro income is treated. Basically, everything that we’ve spoken about until now would apply to remortgages as well as purchases.

How can a broker help me get a mortgage if I’m paid in euros?

Speaking to a broker is always useful, because policy does change. Talking to someone who’s up to date on things is going to help. We can give you an exact answer on what’s possible at that moment in time.

There are a few lenders you can look to use, so having someone with knowledge of their policies will get you the broadest range of options. The obvious question is, why would you do all the legwork yourself when you can get someone else to do it for you? Just make life easier. Speak to a broker.

It just takes a quick 20 minute chat for us to establish what’s going on with your circumstances. We will do a bit of research and come back to you within a day or two with a firm answer of what’s possible.

People always appreciate taking a bit of time to get a firm answer, rather than a few wishy-washy possible options. We always get the information up front to be as thorough as we can in our fact finding. That way, we can come back with some certainty in the options for you.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.

Approved by The Openwork Partnership on 20/05/2024.