CIS Mortgage Bad Credit
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CIS Mortgage Bad Credit
David Sharpstone is back to explain how the mortgage process works if you are a CIS worker with bad credit.Podcast approved by The Openwork Partnership on 13/12/2024.
Does having bad credit as a CIS worker affect my ability to get a mortgage? What are my options?
The first thing to consider is what we mean by bad credit. It could be anything from a late payment on your water bill to the other end of the spectrum, where you wave the white flag to your creditors. You can’t cope anymore and take out an Individual Voluntary Arrangement (IVA).
If you’ve got one late payment in the last 12 months, and it’s a one off, you could probably still go to a high street lender. But the more bad credit there is, the worse it gets.
There are CIS mortgage lenders – who I call subby-friendly – that would lend to you if you have a CCJ registered over two years ago. In fact, there are lenders who would lend to CIS workers with a CCJ over six months ago, but still within the last 12 months.
A CCJ means County Court Judgment, which basically means you’ve ignored letters and haven’t paid your bills. Mortgages could be done for CIS subcontractors with CCJs, defaults, even debt management plans.
The more historic they are, the better. Most of these things stay on your credit report for six years. Even if it was five years ago and you paid it off, it’s still going to sit there and lenders will see it. With defaults and CCJs registered for anything more than £1,000, your chances of getting a high street lender are pretty abysmal.
We would probably be looking at more specialist lenders, ones you’ve never heard of, and their interest rates might be higher than the high street. It’s because they’re lending to somebody that they consider to be higher risk.
If you do have adverse credit that’s anything more than a late payment, I suggest having a 15% deposit as a minimum to find a half decent mortgage deal.
Are there specific lenders who specialise in mortgages for CIS workers with bad credit?
The mortgage lenders that accept CIS workers with bad credit would pretty much lend to anyone with bad credit, as long as they have taxed income and live in the UK. Whether you’re employed, self-employed or paid through CIS, we would go to the same lenders.
There are three or four mortgage lenders I regularly use that allow for CIS income to be used with a less than perfect credit history [as at the time of recording in November 2024].
What is considered bad credit in the UK?
Bad credit would be anything where you’ve missed a payment on a financial credit commitment, and shows up on your credit report. CCJs and defaults are the ones I see most often.
There are also debt management plans, IVAs, bankruptcy and repossession – these sorts of things come up as well. There’s a full spectrum of what could be considered to be bad credit in the UK.
Can I still get a mortgage if I’m a CIS worker and have had previous bankruptcy or foreclosure?
I think foreclosure is an Americanism – I don’t hear that word too often. If you’re paid through the CIS scheme and previously you had your property repossessed, or you were made bankrupt, it is possible to get a mortgage. You’re not banned forever.
It does have to be declared to a mortgage lender. A lot of lenders want that bankruptcy order to have ended perhaps two, four or six years ago – it depends on their individual rules.
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What if CIS worker has been declined for a mortgage with bad credit previously? What happens next?
It depends on the reason for the decline. Perhaps you’ve been declined for a mortgage with bad credit, you’re paid through the CIS scheme and it was just because you did not meet the mortgage lender’s criteria. In that case, there’s no reason why you couldn’t go to another mortgage lender and try your luck there.
You might you’ve been declined because they are not happy with certain aspects of your application. It might be the source of the deposit, or they think you’re not telling the truth about your income.
If you’ve been declined for that reason, you wouldn’t even know about it – they’re not allowed to tell you. They would certainly share that information with other mortgage lenders, though.
If you’ve ever tried to be naughty on a mortgage application and not present the truth, don’t be surprised if you’re declined by multiple lenders.
If I’m a CIS worker and a First Time Buyer with bad credit, will it affect me getting a mortgage?
I often see First Time Buyers with bad credit. It’s not unusual for somebody to take out debt whilst they’re a student and then irresponsibly not pay it back. Now they’re in their 20s and it was five or six years ago, but still shows on their credit report.
We could get them a mortgage, but again it depends where they are on the spectrum of bad credit. If we’re talking about historic CCJs and defaults over two years ago, you would need a 10% if not 15% deposit to get a mortgage as a First Time Buyer paid through the CIS scheme.
Does a CIS worker need a larger deposit for a mortgage with bad credit?
If you’re paid through the CIS scheme and you’ve got bad credit that’s more than one late payment, I would recommend having a 15% deposit as the minimum. In fact, a lot of mortgage lenders for CIS workers with bad credit don’t even have mortgage products unless you’ve got a 15% deposit.
What else do we need to know about getting a mortgage as a CIS worker with bad credit?
If you’ve got bad credit, the chances are that if you walk into a high street lender you won’t come out with a mortgage. Bad credit mortgages for CIS workers are often only available through a mortgage broker.
You’re going to need to find a broker that could help you if, firstly, you’re paid through the CIS scheme and secondly, you’ve got bad credit.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Approved by The Openwork Partnership on 13/12/2024.
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