CIS Mortgages Explained

Can you still get a CIS mortgage?
Getting a mortgage as a CIS worker in the UK can be a tricky process, but is achievable.

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What is a CIS Mortgage?

The good news is that although deals aren't as widely available, you can still get a 95% mortgage with some lenders. In terms of monetary value, if you were looking at purchasing a property for £150,000, you would need a minimum deposit of £7,500.

What is CIS?

First of all, what is CIS? CIS stands for Construction Industry Scheme, which is a UK government-run scheme that exists to ensure that subcontractors in construction pay the right amount of tax. Any subcontractor working in construction who earns more than £120 a week must register as an employee, otherwise they could be liable to pay back any tax to HMRC (His Majesty’s Revenue and Customs).

What is the difference between a CIS and traditional mortgage?

There is really no difference between a CIS and traditional mortgage when it comes to the actual products.

As standard, you’ll need to match the usual requirements; a good deposit and proof of income. What is different is the advice you will need. Lenders will look at your application slightly differently. We’ll talk to you about this in detail during your appointment with one of our qualified mortgage advisors.

How to get a CIS mortgage

Working on a CIS basis, you have a payslip with a basic 20% deduction for tax, then it is your responsibility to submit annual accounts to HMRC which will then show your net profit, upon which tax and national insurance is calculated.

From a lenders point of view, this is generally treated as a mortgage for someone who is self-employed, which then means that you will need to have two years accounts, and the amount lent will be based upon your net profit.

There are though some lenders who will treat you as being ‘employed’ for income purposes, and work off the gross payslips received, and they will not require two years track record. The difference between what lenders will lend on both can be significant.

What are the CIS mortgage lender requirements?

Mortgage lenders will look at your annual income to decide how much they will lend you. This is usually 4-4.5x your annual income but this can vary depending on lenders.

Unusually with CIS, most lenders will look at income for the last twelve months, rather than the traditional three years.

This means you may be able to apply for a mortgage earlier than if you were applying for a self-employed mortgage, for example.

How to apply for a CIS mortgage

If you are wanting a mortgage and work under a CIS contract, then contact us. We have a range of lenders that are happy to look at your application and our advisors are well versed in this type of application.

Please call us on 0115 9499988.

What fees are associated with buying a property?

Valuation fee

When buying a property you want to know that the property is worth what you are paying for it, and if any repairs are needed, you can then make a decision on whether you want to proceed with the purchase and whether you want to reassess your offer to take into account any repairs needed.

Traditionally, lenders have instructed a surveyor to undertake a basic valuation, but this is now often replaced by a desktop valuation where information is gathered online on the likely value of the property. Whilst this may be acceptable to the lender, it does mean that nobody has been into the property to see and assess any particular issues. Both of these scenarios could leave you owning a property, which you may wish you had never bought, for example, structural issues or damp problems would not have been brought to your attention and you will have little chance of recovering any costs from anyone.

With some mortgages this valuation may cost you £200-£300, however in some instances it is provided free of charge. A more in depth survey is a Homebuyer or Level 2 Survey, this will cost from around £450 and will go into far more detail. This type of survey is suitable for most conventional or standard properties. For larger, more unusual properties or those in a state of disrepair there is a Full Structural or Level 3 Survey.

We would always recommend that first time buyers go for more than the basic valuation, it will help identify problems and can aid you in negotiating a lower price for the property.

Lender Arrangement fee

Some mortgages have arrangement fees and others don't. In many instances, these fees can be added to the advance, but it will mean that you are paying interest on a larger debt.

Whether it is worth paying a fee for a mortgage depends on the interest rates, the size of the mortgage and the size of the fee. Your mortgage advisor will be able to compare the deals and calculate which is the most economic route for you.

Broker fee

Your mortgage advisor may charge you a fee to undertake the research, make a recommendation and submit an application. Make sure you know what this figure is before committing to proceed.

Legal fees

You will need a solicitor or conveyancer to deal with the legal work involved in your purchase. If you would like a quote for this then please ask, as we have arrangements with a number of solicitors.

Stamp Duty

This is a tax paid when you purchase a property. Eligible first time buyers won't pay Stamp Duty on residential property purchases up to the value of £425,000. On purchases over this and up to £625,000 the tax is 5% of the amount over£425,000. Over £625,000 then normal Stamp Duty rates apply.

FAQs

How much deposit do I need?

Mortgages are generally available with only a 5% deposit, although increasing this to 10% or more will bring greater choices and generally lower rates of interest.

How much can I borrow?

All lenders have complex affordability calculators which take into account not just your income, but also among other things the number of people living in the property, the cost of any credit commitments and the length of time the mortgage is over.

There are many different calculators, meaning the amount a lender will consider lending will vary from one lender to another. Often these tend to work out around 4.5 to 4.75 times income, although there are some that will consider up to 6 times income.

Can I get a first time buyer mortgage if I have bad credit?

This is far more complicated to answer, but it is still possible that there will be a mortgage available to you. Which lenders will consider lending will depend on what is registered and when it was registered. There are lenders that will ignore adverse information if it is registered a while ago.

This is where the value of an expert mortgage advisor will really come to the fore. We would always recommend, if you have any adverse information registered, that you obtain a copy of your credit report. We've teamed up with Checkmyfile to give you 30 days access to your multi-agency report. Click here to get started.

How much Stamp Duty (SDLT) will I pay?

As long as one of the purchasors has not bought a property previously, then you will be eligible for a lower Stamp Duty Land Tax, this is calculated on the following basis:

  • Stamp Duty is exempt up to £425,000
  • 5% Stamp Duty payable on the portion between £425,001 and £625,000
  • If the purchase price is greater than £625,000, then you will be subject to the standard SDLT rates. The calculation is zero on the first £250,000, the next £650,000 is charged at 5%, 10% on the next £575,000, and 12% on any portion above that.

Can I get a buy to let mortgage as a first time buyer?

There are schemes and lenders that will consider lending to allow someone to buy a property and rent it out even if you are living with family or renting a property.

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