UK Mortgage with USD Income
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UK Mortgage with USD Income
David Walsh explains how getting a mortgage in the UK works if you are paid in US dollars.
Podcast approved by The Openwork Partnership on 29/10/2024
How can you get a UK mortgage if paid in US dollars?
The obvious answer is to make sure you focus on lenders that accept this form of income. Not every lender will. A lot of them need your income to be denominated in sterling, but a handful of high street banks and more specialist lenders will use US dollar income.
You just need to make sure you’re focusing your efforts in the right areas, and that’s obviously something a broker could help you with.
In terms of how you could get a mortgage with US dollar income, the conversion is done upfront. Whatever you receive in US dollars, we will convert to sterling using xe.com. We notify the lender of the exchange rate, how we calculated it and the date.
We then apply any ‘haircuts’ the lender might use. Not every lender uses 100% of foreign currency income – they might take a haircut of between 10% and 25% to account for fluctuations in exchange rates. This makes sure you could sustain your mortgage payments even if your pay in foreign currency drops against sterling.
That income is used for the application. So it’s basically just focusing on lenders that will accept the income, and calculating what they will use and then proceeding as usual.
Who can take out a UK mortgage when paid in US dollars?
There are two categories. People that are paid in US dollars and working in the UK, and those paid in US dollars and working overseas.
People working in the UK tend to be in firms with headquarters overseas. They’re employed in the UK on standard terms, but their salary and other income is denominated in US dollars.
We deal with a lot of lawyers who have headquarters in New York but offices in London. They’re paid in US dollars.
The structures could vary. Lenders may apply a cap or a collar to minimise fluctuations in pay due to exchange rate changes, but generally it’s fine. It’s just about how we convert that income back to sterling, apply any haircuts and proceed.
If you are employed overseas, it would depend on whether the lender would accept income from that territory. As an example, HSBC maintains a matrix with every country listed. It states whether they accept the jurisdiction you are employed in. If the answer is yes, that’s absolutely fine.
Our clients tend to work in the US, Europe, Hong Kong and Singapore – the main finance hubs. But the list of countries that are acceptable is pretty wide ranging. It does change, so it’s worth finding out.
What are the typical types of mortgage clients with US dollar income?
If you’re employed by an international firm, you might be required to work overseas for a while. You might do your working week overseas and come back at weekends.
Your family home could be in the UK, with your partner and children living there, but you’re working overseas and coming back and forth. Those are typical examples of clients we’ve helped who are paid in US dollars working overseas.
There’s no need to deal with particularly niche or specialist lenders.There are good high street banks that will do that. So you’re not necessarily paying over the odds on rates and fees to use that income.
Is a US dollar based income acceptable to British mortgage providers? Does the property have to be in the UK?
US dollar income is acceptable to certain lenders, but not all of them. There are a handful of good high-street banks and more specialist lenders beyond that, so you’ve got a decent range of options.
Obviously, the treatment of the income could vary in terms of the haircut applied for fluctuations in exchange rates.
Most UK lenders would need the property to be based in the UK, but some would finance overseas properties. It’s a bit more of a specialist area and there are restrictions in the countries and regions that are accepted.
If you’re considering an overseas purchase using US dollar income, it’s worth speaking to a broker and finding out what your options are. It’s all very specific to you as a client and the property you want to buy.
Which lenders accept US dollar income?
In terms of mainstream banks that we most commonly deal with, it’s Santander, Natwest and HSBC. They have all been in the market for a number of years. Within the last two months, Halifax joined – that was around August 2024.
So four high street banks will accept US dollar income. The haircuts that apply will vary, and as of today in October 2024, NatWest don’t apply any haircuts. Santander are a bit more cautious and apply a 25% reduction to each income to account for any fluctuations in exchange rates.
There’s a good range of options, but differences in how they treat the income. If we’ve got a slightly more complex situation that doesn’t necessarily work on the high street, there are a good range of private banks that will look at using foreign currency income.
They have the ability to look at things on more of an individual basis and apply manual underwriting. They’ve got the time and resources to do those checks, so it’s a bit more complex – but there’s an option there. They tend to have minimum loan requirements of £1 million.
How complex is the mortgage application if you are paid in US dollars? How could the currency I’m paid in affect the mortgage?
It’s not really any more complex than a standard mortgage application. Once we’ve determined how much you’re receiving in US dollars, we do a conversion. We notify the lender of how that conversion has been and done and the date.
We then apply any haircut that that lender applies – it might be zero or between 10% and 25%. That income is used for the mortgage application going forward. The affordability and Loan to Income assessment is all based on that income figure we calculate up front.
It’s fairly straightforward in terms of the income being paid in US dollars. But if you’re based overseas, or you’re looking to buy a property overseas, that will add complexity.
Most of our clients are in English-speaking countries, but a lot of countries using US dollars aren’t necessarily English-speaking, so you might have to get documents translated. That could add a layer of complexity.
You may need credit reports from the country where you’re working. But if the only quirk of the case is that you’re paid in US dollars, it’s all pretty easy and standard.
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Are there any additional taxes or fees I need to pay if I get a UK mortgage with US dollar income?
On the taxes, it’s not for me to say – I’m not qualified to offer advice on taxes. In terms of fees, if the only quirk of the application is that you’re paid in US dollars, those four banks we named earlier will offer standard terms. The interest rate and product fees or other fees will be the same as if you are paid in sterling.
If you’re looking at doing something a bit more complex, because you are based overseas or buying overseas, lenders might have a second range of products: an international range that could be higher on fees or rates to cover the extra risk and complexity.
How does my employment status affect mortgage applications as a US dollar earner?
For permanent employees, that’s very straightforward. Standard criteria would apply. Lenders have a minimum period of employment, but actually those four we mentioned only need one pay slip. You could have been in the job for a month and they’ll use that income straight away.
In fact, they will actually use income up to three months before you even start the job, based on your basic pay. We could use that fairly quickly. The only consideration with the fact that it’s US dollars is the conversion, as we discussed previously.
It’s the same with any variable elements of pay, whether that’s monthly commissions, quarterly bonuses, annual bonuses – that will also be as per standard policy. Lenders might take 50% or 100% of those into account. They might use a two year track record, or they might use the latest figure.
All of that varies depending on the lender, but that would be standard. There’s no difference to how that income is treated just because it’s paid in US dollars. It’s just about making that conversion upfront and determining how much income we could use. It’s not really any different as to whether you work in the UK or overseas, and whether you pay tax in the UK or in the jurisdiction where you’re employed.
If you are self-employed, you might have various sorts of income. You might have UK income plus consultancy work where you’re paid in US dollars.
If you’re paying tax in the UK, that income is converted to sterling for the purposes of your tax return, so the tax calculations will show income in sterling. That’s fairly straightforward. We just look at what you receive. For most lenders, we look at the last two years for their assessment.
If you’re self-employed and you pay your taxes overseas, the lender will want to see the equivalent tax documents from that country. They might want to see tax returns and company accounts. If the documents are in a foreign language, you’ll need to get those formally translated. Again, it’s not really an issue, just a bit more work in getting that evidence together.
What documents do I need to show lenders when applying for a mortgage in the UK if I’m paid in US dollars?
The first point is that standard document requirements would apply. You need ID – passports, for example – proof of address, proof of deposit, and bank statements as evidence of income and outgoings.
On the income side of things, if you’re employed we generally need payslips to prove your income. If you’re paid in US dollars, we need the payslips showing the dollar amount you’re receiving.
If you’re self-employed, it’ll be your tax calculations and company accounts. Again, they might be UK documents, which is fairly easy, or it might be overseas in which case you might need them translated.
If your US dollar income is paid into a foreign bank account, we’ll need the bank statements for that account, but it doesn’t need to be with a UK bank.
What are the main factors that affect mortgage applications when your income is in US dollars?
If the US dollar element is the only quirk of the application, it’s fairly straightforward. One thing that will affect the application is the exchange rate at the point of application. That will obviously impact the income you could use and therefore the amount you could borrow.
The other key factor is how much of a haircut or a discount to that income the lender will apply. Again, that’s lender-specific. Those are the two main things that will impact the mortgage application.
Can I still get a mortgage in US dollars if I have bad credit?
Yes, potentially. It could depend on how bad it is. With credit, lenders policies’ can be quite black and white. If you had a default in the last six months, for example, or if you’ve been declared bankrupt in the last year, you’re probably not going to get a mortgage.
Other more innocuous things, such as missed or late payments, and even CCJs, as long as the amount isn’t too high, will potentially be accepted. It will come down to credit scoring as to whether or not the lender accepts it.
It’s not something we could answer in general terms. Even if we’ve got sight of your credit report, it comes down to that lender and their own internal scoring system. It’s not just a case that if your score is 600 with Experian it will pass. It’s all down to the lender.
Their scoring does change. They could tweak their credit scoring requirements on a daily basis. If they’ve got a lot of applications coming in, they stem the flow by only accepting higher credit scoring clients. It all comes down to your circumstances, the lender we’re applying to – and in some cases, when you’re applying.
Can you get a UK mortgage if you are self-employed or a contractor paid in US dollars?
Yes, you could. Again, if you’re self-employed and you pay tax in the UK, it’s straightforward. That US income will be converted to sterling for tax purposes. We’ll have UK tax returns and tax calculations that show the sterling equivalent of your income.
If you’re self-employed or a contractor, you receive income in US dollars and pay tax overseas, they’ll want the equivalent tax documents from that country. It depends on whether or not that country is accepted.
Some lenders are okay with different jurisdictions, so it’s worth checking on that. But it’ll be similar documents – tax calculations, company accounts for the country where you pay your tax. Again, if they’re in foreign language, we need to get those formally translated.
Am I able to remortgage if I’m paid in US dollars?
It’s pretty much the same as if you were making an application for a purchase. The same criteria would apply. UK or overseas employment is fine.
It’s just a case of making that conversion, looking at the currency conversion and date, applying any relevant haircut and using that income for the affordability assessment. The documents will all be the same as before. The lenders are all the same, so it’s very similar.
What else do we need to know about a UK mortgage with USD income?
I’d always advise speaking to a broker. We’ve got the knowledge of the relevant lenders in this sector. We could easily point you in the right direction. We could tell you exactly what your options are just from one phone call, rather than you having to go back and forward to different lenders, finding out what they will and won’t do.
We keep ourselves updated on any changes in policy, so we could notify clients if there’s any differences or changes that will affect them. It just makes your life easy, getting answers upfront, and when the time comes to make a mortgage application, we will look after all the administration to take all that hassle and effort off your hands.
Most people we deal with are busy in their professional lives. They don’t really want to be spending time queuing for a call centre to find out what’s going on with their mortgage. They could drop us a quick email and we’ll give them an update. It’s just a lot easier.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Approved by The Openwork Partnership on 29/10/2024.
