A CIS mortgage stands for construction industry scheme mortgage. It’s a type of mortgage specifically designed to help self-employed people in the construction industry buy their own homes. In this blog, we’re going to explore how CIS mortgages work, the advantages they offer, and what you need to consider before applying.
What are CIS Mortgages?
A CIS mortgage is a type of loan specifically designed to help self-employed people in the construction industry purchase their own homes. It’s a specialized form of mortgage that caters to the specific needs and requirements of those in the construction industry. For more information on excellent CIS mortgages, head over to https://jonesandyoung.co.uk/cisform/. Jone and Young will be able to provide an accurate estimation of the amount you can borrow and answer any questions you may have.
How do CIS Mortgages Work?
The CIS mortgage works by allowing contractors and other individuals on the CIS scheme to use their payslips as gross pay, whilst also allowing for a smaller deposit. Not only does this make it easier for those in the industry to apply for a mortgage, but it makes it more affordable as well. The lender will assess your finances and any other factors that could affect your ability to repay the loan, such as credit score, income, existing debt or financial commitments. This is done through an affordability assessment which helps lenders determine the amount of loan you can afford.
Normal Mortgages vs CIS Mortgages
The biggest difference between a normal mortgage and a CIS mortgage is in the way income is calculated. When applying for a normal mortgage, lenders will assess your income based on your last three years’ worth of accounts. With a CIS mortgage, however, lenders will take into account the gross amount paid to you from HMRC each month over the past 12 months. This means that those with irregular or variable incomes, such as contractors and freelancers, can apply for a CIS mortgage much more easily than a traditional one.
What are the Main Features of CIS Mortgages?
The main features of CIS mortgages are:
• Easier to apply for – As discussed above, the income calculation process is much easier when it comes to a CIS mortgage. This makes it simpler and faster to apply, enabling you to purchase your dream home more quickly.
• Smaller deposits – The minimum deposit required for a CIS mortgage is usually much smaller than for a normal mortgage. This can make it easier to get on the property ladder and make your dream of home ownership a reality.
• Higher loan-to-value – As well as requiring smaller deposits, CIS mortgages typically offer higher loan-to-value ratios, meaning you can borrow more with less money upfront.
• Flexible repayment terms – With a CIS mortgage, you can typically choose from a range of repayment terms, allowing you to tailor your loan to suit your needs.
What Should You Consider Before Applying for a CIS Mortgage?
Before applying for a CIS mortgage, it is important to consider the following:
• Credit score – Your credit score will be taken into account when applying for a mortgage and will affect the amount of loan you can borrow. Ensure that your credit score is in good shape before applying to give yourself the best chance of being approved.
• Income – Check your payslips to make sure all your income has been accounted for. This will help ensure that you can accurately assess how much you can afford to borrow.
• Financial commitments – Ensure that you are aware of any existing financial commitments, such as credit cards or loans, and make sure they won’t affect your ability to repay the mortgage.
The Benefits of Choosing a CIS Mortgage
Let’s take a look at the numerous benefits of choosing a CIS mortgage:
• Lower interest rates – As lenders are taking on a higher risk when it comes to CIS mortgages, they are often willing to offer lower interest rates. This can help keep your monthly payments more affordable.
• Flexibility – A CIS mortgage offers more flexibility in terms of repayment periods and loan amounts, allowing you to tailor the loan to suit your individual needs.
• Accessibility – As CIS mortgages are easier to apply for, they offer a more accessible way of getting on the property ladder, even if you have an irregular or variable income.
• Speed of process – As CIS mortgages are simpler to apply for, the process is often much faster than a traditional mortgage.
• Security – With a CIS mortgage, you have the added security of knowing that your income is being taken into account. This can provide peace of mind when it comes to repayment.
• Borrow more – As mentioned previously, CIS mortgages allow you to borrow more for a smaller deposit, helping you make your property dreams a reality.
How To Apply For a CIS Mortgage:
The process for applying for a CIS mortgage is similar to that of a traditional mortgage. You will be required to provide evidence of your income, prove your identity and pass an affordability assessment. However, the main difference is that lenders will take into account HMRC payments rather than three years’ worth of accounts when assessing your income.
When it comes to deposits, you will usually be required to pay a minimum of 5% of the purchase price. However, this can vary depending on your individual circumstances and lenders may accept smaller deposits in some cases.
Finally, it is worth noting that as CIS mortgages are a higher risk for lenders, they tend to offer shorter repayment terms and may come with higher interest rates than traditional mortgages. This means that it is important to carefully consider your options before applying.
Ultimately, a CIS mortgage can be a great way to purchase your first home or move up the property ladder if you have an irregular or variable income. With lower deposits and more flexible repayment terms, they offer an accessible route into homeownership that would otherwise be difficult to achieve. Make sure to consider all the factors before making your decision and always compare different mortgages to find the best deal for you. Good luck with your mortgage journey!