Remortgages for CIS workers
Monday 22 May, 2023
In this article Marian Isciuc reviews the options for CIS workers when their mortgage deal ends. Marian, is a Thomas Oliver mortgage broker and protection specialist working with clients in Harlow, Essex and Gray’s Kent.
CIS workers should act and call a mortgage broker before their deal ends
If you are a CIS worker and your fixed deal mortgage is coming to an end, then you should speak to your Thomas Oliver mortgage broker to review your options at least six months before the fixed deal ends. Call our local mortgage broking team now on 01707 872000.
If rates are going up sort a new mortgage deal as early as possible
Most of the mortgage lenders allow their clients to secure a deal six months before their fixed deal ends. This deal can be changed if a better mortgage rate becomes available before the start of the existing deal so it’s worth organising it early. If rates are going up, then it’s best to secure a rate as soon as possible.
CIS workers should discuss their mortgage options with a mortgage broker
Most CIS workers have secured a mortgage using their CIS income, which is not acceptable by most of the mortgage lenders. Generally, a remortgage will not pass the affordability assessment because most of the mortgage lenders will look at the self-employed net profit or limited company accounts, rather than the CIS income paid over the previous three, six or twelve months.
The CIS income includes the CIS tax whereas the net profit excludes business expenses. Therefore, many CIS sub-contractors have no choice but to switch with their existing mortgage provider, or remortgage through a limited number of mortgage lenders that accepts the CIS income option. It’s imperative to contact your mortgage broker who can assess all possible options and offer you personalised mortgage advice.
Should you remortgage or consider a product transfer and rate switch?
If a CIS worker wants to remortgage they will have to change banks. They will have to complete a new mortgage application, undergo affordability checks, have a new market appraisal for your property, which can be done online or by way of a physical inspection. However, the bank doesn’t always require a physical inspection of the property but this may be necessary.
The interest rate available for clients depends on the LTV (Loan to Value), which is the percentage expression of the mortgage loan set against the value of the property. The lower your LTV ratio, the higher your equity in a property and the better the mortgage rates you could secure.
Product transfers and switches with your current mortgage lender save time
To product transfer or switch your mortgage deal with your existing lender is faster and doesn’t require the affordability checks that are needed with a remortgage application. If the mortgage account is not in arrears, the existing lender is obliged to accept the rate switch without needing any documentation. But no additional borrowing is allowed, or amendments to the mortgage term unless proof of income is provided. All the systems provide a property value taking into consideration market changes and indexed valuations, which may reflect the actual value, but sometimes it can be less. These valuation figures can be challenged by way of requesting a new market appraisal and if successful, then a better mortgage rate may become available.
How can Thomas Oliver your local mortgage broker help CIS workers?
Marian Isciuc, mortgage broker and protection specialist in Harlow, Essex and Gray’s Kent said:
‘At Thomas Oliver we offer a personalised mortgage advice service to our clients. If you choose a new mortgage product six months in advance of your mortgage deal ending, we will monitor the mortgage market until the existing fixed deal ends to make sure you always get competitive deals available. Your mortgage broker will make an initial assessment by reviewing the retention deals your existing lender has to offer. We then compare it to the competitive deals in the mortgage market and advise clients on the most suitable option.
It is worth remembering that to remortgage to another mortgage lender comes with additional fees compared to a rate switch/product transfer, as it is more complex and requires legal representation. The remortgage offers from banks differ from lender to lender and may include free legal service or cashbacks which can be used to offset the extra cost. All these costs need to be taken into consideration when assessing the most suitable mortgage option for our clients. Sometimes a slightly higher mortgage rate offered by the existing bank is cheaper than remortgaging to another bank that charges extra fees.’
Mortgage product transfer myths
All the mortgage lenders offer clients two deals, a lower interest rate that comes with a £999 product fee, or a slightly higher interest rate with no fee. The brokerage system calculates the cheaper option for our clients, and we recommend the cheapest option. The choice is dependent on the mortgage loan amount and the fixed period, which could be two years or five years.
Some clients believe that the £999 product fee is added to the mortgage loan and is paid to the broker, and for this reason brokers don’t usually charge for fees on these applications. However, this is not true. All mortgage brokers get paid a procuration fee by the banks, which is an arrangement between the banks and intermediaries. This is never added to the loan. And this is usually lower on rate switches rather than remortgages, although the amount of work needed for the initial assessment is the same for both applications.
If you are a CIS worker and your current mortgage deal is coming to an end, call our local mortgage broking team now on 01707 872000 for expert CIS remortgage advice.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
Approved by The Openwork Partnership on 11/05/2023.