Home Mover

What type of mortgage can I get as a CIS worker and home mover? What are my mortgage options if I’m signed up for the CIS scheme and looking to move?

If you’re paid through the CIS scheme and you’re looking to move home, the first thing I do as your mortgage advisor is look at your existing mortgage. It might be that you’re tied into a deal that hasn’t quite come to an end. If there are quite a few months left on it, we need to see what the options are.

If you’re tied into a mortgage deal, it’s possible to move that deal across to a new property, which is called ‘porting’. We also have to make sure that the existing mortgage lender is CIS friendly. Do they have within their lending criteria the ability to assess mortgage affordability using your gross CIS pay slips?

If that’s not possible with your existing lender and we can’t use CIS income, but you’ve been in your job for two years, we’ll look at what your self assessed profits look like. Often, it’s not enough. This is why I love CIS, because it means you could borrow more. Is the profit on the self assessments sufficient to make the move happen?

I’m trying to avoid you paying any early repayment charges, unless they are very small. If it’s just £300 we could just just write it off. But if it’s into the thousands, I would make sure you’re not paying a penalty unless there’s absolutely no other choice.

If we find there is no other choice, perhaps because you’re with a lender that doesn’t cater for CIS and your profits are too low, then we look at a more CIS friendly mortgage lender. We work out how much you could borrow and how much deposit you have. That usually comes from the sale of the property, after all your fees, stamp duty and any debts if you’re paying those off at the same time.

You might be tied into a Help to Buy scheme and have to pay some back to the government. We then work out what sort of mortgage you could get using your CIS income and what lenders we could go to. It’s a very different process compared to a First Time Buyer. There’s a lot more to calculate.

Is it more difficult to get a mortgage as a home mover if I’m a CIS worker?

It’s not more difficult. In some ways, it’s easier to get a mortgage as a CIS worker than as a self-employed worker. I say that because most mortgage lenders that accept CIS income might just look at the last three months’ pay slips and bank statements.

If you are just using a self-employed income, we need SA302s, tax year overviews, business bank statements and sometimes references from accountants . We need a longer track record to show that your turnover stayed consistent.

Sometimes mortgage lenders will do a forensic analysis of your accounts, and this is why people think it’s more difficult to get a mortgage if you’re self-employed. I agree that there are more hurdles if we use self-employed income, but if we’re using your CIS income, we’re really treating you more like you’re employed.

For most mortgage lenders that allow for CIS income, we actually choose the employed option for CIS workers from their drop-down menu. The mortgage lender will treat you more as an employed person than a self-employed one.

What is a Mortgage in Principle? How do I get one as a CIS worker?

A Mortgage in Principle is exactly the same as an Agreement in Principle and a Decision in Principle.

You’ve either gone directly to a mortgage lender or through a broker and to get an initial lending decision for you. We go to a mortgage lender with your name, address, income and credit commitments, and ask that lender whether, in principle, they would give you a mortgage. Normally there is then a certificate you could show the estate agent to confirm your borrowing potential.

It doesn’t mean that you’re definitely going to get the money – it means you’re 50% of the way there. It gives you the green light from a lender to apply for the mortgage. There’s been no underwriting and no human being has looked at any of your paperwork apart from the broker, and it’s only as good as the numbers that have been put in..

Let’s imagine you see a mortgage broker that’s only been doing the job for two weeks. They’re still learning. Maybe they don’t fully understand your income or they underestimate or overestimate it. The Mortgage in Principle is only going to reflect the broker’s understanding.

The other crucial thing is that it’s based on your credit score. Usually with most lenders it’s a ‘soft’ footprint, that just scratches the surface of your credit history. On full applications, once you’ve found a property or are ready to remortgage, the lender typically does a more enhanced, harder credit check.Sometimes that could pull up additional information that wasn’t initially disclosed.

If you are a CIS worker, you could get a Mortgage in Principle from any bank or any building society yourself. However, do you know for certain whether that bank caters for CIS workers? Will they treat you as employed and use your gross pay slip income before expenses and tax? Or will they treat you as self-employed and use your profit after your expenses from the last two or three years of self-assessment?

What I’m trying to say is if you are a CIS worker and you need a Mortgage in Principle to buy the best property for your money, see a mortgage broker that understands CIS income and knows which lenders use CIS income to work out mortgage affordability.

How long does the mortgage application process take for a home mover who is a CIS worker?

If you’re a homeowner and you’re paid through the CIS scheme, you should allow for between 10 and 15 working days for your mortgage to be approved. Sometimes it can be done much quicker – I’ve seen it done in 24 hours.

Sometimes it could be much slower, particularly if you’ve got bad credit or other complex issues. If we’ve got to deal with a more specialised mortgage lender, they tend to underwrite a little bit more heavily, and that could go on for one to two months.

Your mortgage broker should tell you from their own experience how long a particular lender will take. As long as your expectations are managed, you should be fine. I wouldn’t panic if a lender is taking four to eight weeks. If they’re asking for more information, it means that they’re trying to find a reason to lend, not a reason to decline.

What’s the maximum amount that can be borrowed on a mortgage as a CIS worker and a home mover? What’s the minimum deposit?

The minimum deposit needed is potentially nothing – 0%, but I’ll come back to that in a minute.If you’re buying a standard property on the open market, as long as you’ve got a strong credit score, then a 5% deposit is possible.

So, if you’re buying a property for £200,000, that’s a £10,000 deposit. If you are buying a property from the local authority on the Right to Buy scheme, it’s possible to use the discount as your deposit. So you don’t actually need to put down any of your own money. There are mortgage lenders that will lend with zero deposit on a Right to Buy to CIS workers.

If you’re a CIS worker looking to move home, the maximum you could typically borrow is up to £1 million pounds with most lenders. Some cut out at £500,000. If it’s about the maximum you could borrow on your income, then one bank would lend up to six times your gross CIS income.

If you’re earning £200 pounds a day as an electrician, that’s £1,000 a week, and roughly £50,000 a year. This mortgage lender might lend you up to £300,000. But while you could get up to six times, it’s typically 4.5 to 5.5 times your earnings. It just depends on your level of income.

What are the eligibility criteria for a home mover mortgage if somebody is part of the CIS scheme?

To be eligible to get a mortgage based on your gross CIS income, you have to have two things. You need to have been paid through the CIS scheme for at least three months, and you need a track record of working in that job role, in that industry, for at least 12 months.

That might be the last three months via CIS as self-employed, and nine months preceding that as employed. That’s absolutely fine as long as you can evidence the history – you haven’t just gone from being a car mechanic to a plumber.