CIS Remortgage

We specialise in Mortgage Advice for Subcontractors paid via the Construction Industry Scheme (CIS)

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CIS Remortgage, Expert Mortgage Advice for CIS Subcontractors

CIS Remortgage

David Sharpstone explains how the remortgage process works as a Construction Industry Scheme (CIS) Worker

Podcast approved by The Openwork Partnership on 16/12/2024.

Is it harder to remortgage if I am a CIS worker?

If you’re a CIS worker and you’re looking to remortgage, there are always two options. One is to stay with your existing lender – and if that’s the case, they wouldn’t normally ask for any documentation, so it’s quite easy.

But as a mortgage advisor for my own clients, I will always look to see whether there’s a better deal available. That’s the second option – to remortgage with another lender. As a CIS worker, if we’re looking to use your gross CIS pay for affordability, we would need pay slips and bank statements again.

It’s no harder than getting a mortgage in the first place. If you used your CIS income to buy the property in the first instance, the experience should be exactly the same.

From my perspective, as someone who specialises in CIS workers, it’s not hard at all. In fact, I think it’s a lot easier to get a remortgage with CIS income than using self-employed income, because you’re not having to worry about accountants and tax documents.

How long do I need to be CIS registered before applying for a remortgage?

You might not have applied for your initial mortgage as a CIS worker. Perhaps you were employed or regular self-employed. But if you’re now paid through the CIS and want to use that income for your re-mortgage, you need a minimum of three months.

You would also need at least a year in that same line of work – in which case there are high street lenders available to you. You might have been in an employed or self-employed role, not necessarily paid through the CIS.

How does employment history for CIS workers impact the likelihood of being approved for a remortgage?

If you’re looking for a remortgage using your CIS income instead of your tax calculations or your SA302s, we’d need three months minimum.

In terms of employment history, though, mortgage lenders would expect you to have at least one year of history in that same line of work. Some lenders would require two.

So, if you’ve been a librarian and in the last three months you’ve become a carpenter, you wouldn’t be able to get a mortgage. But if you were an employed carpenter and now you’re a CIS paid carpenter, you could, because we’ve got that continuity of employment history.

Can applicants who are CIS workers include their spouse or partner in a joint remortgage application?

Absolutely. Mortgage lenders we go to for CIS criteria will normally treat a CIS worker as employed anyway, because it’s very similar to having an employed job.

Then applicant two, and even applicant three and applicant four with some lenders, doesn’t have to be paid through CIS. They can be employed, self-employed, have benefit income, fostering income or other types of income. We can include up to four people on a remortgage and they don’t have to be paid by CIS.

What factors do lenders take into account when assessing the affordability of a remortgage for CIS workers?

If you’re paid through the CIS scheme and you’re looking to remortgage, affordability is really important for mortgage lenders. They need to make sure that you’re going to be able to make the ongoing payments and you’re not overstretching yourself.

They take into account any existing financial commitment, such as loans, credit cards, short-term finance, car finance and anything where there’s a finance agreement. They don’t worry about your utility bills or council tax – that’s factored in in the background.

They’re also going to allow for the number of dependents you have, whether they are children or adult financial dependents. If you have a parent living with you and they’ve got no income, they would be classed as a financial dependent.

If you’re contributing towards a pension scheme and it’s deducted from your salary, some lenders will factor that in. Paying child maintenance, nursery fees or school fees will also be included in affordability.

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If you’re reading this as a Construction Industry Scheme (CIS) contractor, then you or your partner are probably struggling to find a mortgage right now. We can help.

Can a CIS worker switch lenders when remortgaging?

As I mentioned, when your mortgage deal comes to an end there are always two choices. With my own clients, we start with the most favourable deal we can negotiate from your current lender. But it’s also important to see if there is a better deal from another lender on the market.

We’ve got to appreciate that not every mortgage lender out there will cater for CIS workers. From my last count, around 15 lenders that can use CIS criteria. So if there’s a better deal from another lender and we need to use gross CIS income, we can switch and continue your mortgage with them.

There’s a little bit of legal work involved. These days, the mortgage lender either instructs their own solicitor at their cost, or gives you cashback to cover the bulk of the cost for the legal work.

It’s not like the legal work when you buy a property – that can go on for months. This normally takes two or three weeks and it’s quite simple.

What factors should a CIS worker consider when deciding whether to remortgage?

You will normally remortgage when you’re coming to the end of your existing deal. If you’re on a five-year fixed rate and that’s coming to an end, start three or four months beforehand – you don’t want to do it at the last minute.

A remortgage is actually moving from one lender to another. If you’re sticking with the same lender, we generally call that a product transfer or a product switch.

Things that would impact the decision would be whether there’s a better deal from another mortgage lender – and whether it’s worth the effort to move. If that better deal is only one hundredth of a percent cheaper, you would consider whether it’s worth all the headache of providing all the documentation to save yourself a few pounds a month.

As a mortgage advisor, I would go through those additional costs involved and the extra hassle and help you weigh it up.

Other things to factor are your plans. Is it a like-for-like remortgage, or do you need to borrow more money? You might want to consolidate some debt or raise finance to buy another property. There are lots of reasons for raising extra borrowing.

We might find that your existing lender’s policy doesn’t facilitate what you need to do, in which case we’ll look at other options from other CIS friendly lenders. That’s why it’s really important to speak to a mortgage broker, because we know the remortgage rules with different lenders.

What documentation will a CIS worker need to provide when remortgaging?

It’s exactly the same as when you bought the property. We need proof of income which means at least your latest three CIS payslips. Depending on the lender, it could be up to 12 months.

You would need at least three months’ bank statements – both personal and business, showing your incomings and outgoings.

You would need some up-to-date address ID and photo ID, and it’s also really important to provide a copy of your latest mortgage statements so we know exactly how much is left on your existing mortgage.

What are the advantages and disadvantages of fixed rate versus variable rate re-mortgages for CIS workers?

The advantage of a fixed rate mortgage is that you know exactly how much you’re paying every month and you can budget for it.

For a period of time, whether that’s two years, five years, seven years, or even up to 10 years, you know what you’re going to pay. It doesn’t matter whether the economy changes and rates go up – you’re fixed in for a period of time.

On the downside, if interest rates start coming down significantly, you don’t have the flexibility to jump on a lower rate without paying a penalty to leave your existing arrangement. Those penalties can be quite high – anything up to 5% of your loan amount.

With a variable rate, assuming that it follows the Bank of England, the benefit is that if the base rate comes down over the next two or three years, your mortgage would benefit.

The downside is that the base rate can go up. The interest can go up on a variable tracker mortgage if the Bank of England goes up. It’s more difficult to plan for, because you don’t know exactly how much your payment is going to be.

Can I remortgage if I’m CIS registered and nearing retirement age?

It does become more difficult to remortgage if you’re getting close to retirement, but it really depends how much is left on your mortgage. If you’re age 60, for example, and you’re looking to retire at 70, you’d be talking about a nine-year mortgage to finish before you retire.
In fact, the mortgage lender would insist on that.

If you’ve only got a £50,000 mortgage left and you’re 60 years old, a nine year term wouldn’t be too difficult. But if you’ve got a large mortgage and only a short term to pay it back, it can be challenging.

It’s really difficult to give more detail without knowing your income and how much is left on the mortgage. If you’re within five years of retirement age, a lot of mortgage lenders will put restrictions on whether they will allow a remortgage.

Are there any CIS friendly lenders or mortgage brokers for remortgage applications?

There are around 15 lenders that can do a remortgage for people paid through the CIS scheme, who need to use the gross income instead of profit on self-assessments. I’m a very friendly broker – but I’ll leave that for other people to decide.

What I can say is that we are a mortgage brokerage that really does specialise in workers paid through the CIS scheme. The vast majority of our clients are paid in exactly that way. I’ve been a mortgage broker since 2008, so I’ve been doing this a very long time.

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Approved by The Openwork Partnership on 16/12/2024. 

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