CIS Mortgages Explained

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