CIS Mortgages - 9 Essential Things You Need to Know
Published on 18th February 2025
Securing a mortgage as a self-employed construction worker operating under the Construction Industry Scheme (CIS) can, at first glance, seem daunting. The fluctuating nature of your income and the specific requirements of the CIS can, undoubtedly, present unique challenges. However, with the right knowledge and thorough preparation, obtaining a CIS mortgage is, in fact, absolutely achievable. This comprehensive article outlines nine essential things you need to know to navigate this process successfully.
1. Understanding the Construction Industry Scheme (CIS)
First and foremost, before diving into CIS mortgages, it’s crucial to understand the CIS itself. Essentially, it’s a tax deduction scheme operated by HMRC where contractors deduct a percentage from payments made to subcontractors and subsequently pass it on to HMRC. This system, in effect, ensures tax compliance within the construction industry. Consequently, being registered and compliant with CIS is absolutely fundamental to securing a CIS mortgage. Lenders, naturally, will want to see irrefutable evidence of your CIS registration and, equally important, consistent tax payments.
2. Proving Your Income: The Key to CIS Mortgage Success
Undeniably, the biggest hurdle for self-employed contractors is demonstrating consistent and, crucially, sufficient income. Lenders, understandably, need assurance that you can comfortably afford your mortgage repayments. Here’s how you can, therefore, strengthen your income proof:
- Tax Returns (SA302s): These are, without a doubt, your most valuable assets. Lenders typically require at least two years of SA302s, ideally showing a consistent or, even better, upward trend in earnings. Furthermore, the more years you can provide, the stronger your case will be.
- CIS Statements: Similarly, keep meticulous records of your CIS statements. These provide a detailed breakdown of your earnings and tax deductions, thereby further supporting your income claims.
- Bank Statements: Likewise, consistent and healthy bank balances demonstrate financial stability. Regular savings and a clear pattern of income deposits will, unquestionably, be viewed favorably.
- Contracts and Invoices: Finally, providing evidence of ongoing contracts and a consistent flow of invoices demonstrates a pipeline of future work and, consequently, income.
3. Credit History: A Vital Component
Just like any other mortgage applicant, your credit history is, undeniably, a significant factor in CIS mortgage approval. Lenders, naturally, will conduct a credit check to assess your creditworthiness. A poor credit history can, unfortunately, significantly hinder your chances. Therefore, before applying, take proactive steps to:
- Check Your Credit Report: Initially, obtain a copy of your credit report from one of the major credit reference agencies (Experian, Equifax, or TransUnion).
- Identify and Address Issues: Subsequently, if you find any errors or negative entries, take immediate steps to correct them.
Improve Your Credit Score: Finally, pay bills on time, keep your credit utilization low, and avoid making multiple credit applications in a short period.
4. Deposit Requirements: How Much Do You Need?
The deposit you’ll need for a CIS mortgage can, understandably, vary depending on the lender and the specific mortgage product. While some lenders may, occasionally, offer mortgages with smaller deposits, generally, a larger deposit will, undoubtedly, improve your chances of approval and, moreover, potentially secure you a better interest rate. Aim, therefore, for at least 10-15% of the property value, if at all possible.
5. Understanding Mortgage Affordability Calculations
Lenders, naturally, use specific calculations to determine how much you can borrow. They’ll, consequently, consider your annual income (as evidenced by your SA302s), your monthly expenses, and your credit commitments. It’s, therefore, important to understand how these calculations work so you have a realistic idea of your borrowing capacity. Don’t, however, solely rely on online calculators; instead, speak to a mortgage advisor for a personalized assessment.
6. Choosing the Right Mortgage Lender
Not all lenders, admittedly, are created equal when it comes to CIS mortgages. Some lenders, specifically, specialize in dealing with self-employed applicants and understand the nuances of CIS income. Therefore, research lenders carefully and look for those with a proven track record of approving CIS mortgages. A specialist mortgage broker can be, undoubtedly, invaluable in this process.
7. Working with a Mortgage Broker: An Invaluable Asset
Navigating the CIS mortgage landscape can, undeniably, be complex. A specialist mortgage broker can, therefore, be your greatest asset. They have, in fact, in-depth knowledge of the market, access to a wide range of lenders, and can, moreover, guide you through the entire process. They can, consequently, help you:
- Find the best deals: Brokers can, undoubtedly, identify lenders offering the most competitive rates and terms for CIS mortgages.
- Prepare your application: Furthermore, they can help you gather all the necessary documentation and present your application in the strongest possible light.
Negotiate with lenders: Finally, brokers can, moreover, negotiate with lenders on your behalf to secure the best possible terms.
8. Understanding Mortgage Types and Terms
Just like standard mortgages, CIS mortgages, similarly, come in various forms, including fixed-rate, variable-rate, and tracker mortgages. Understanding the differences between these options is, therefore, crucial. Consequently, consider your financial circumstances and risk tolerance when choosing a mortgage type. Also, importantly, pay close attention to the mortgage term, as this will, naturally, impact your monthly repayments.
9. Planning for the Future: Long-Term Considerations
Securing a CIS mortgage is, undeniably, a significant financial commitment. It’s, therefore, essential to plan for the future and consider potential changes in your income or circumstances. Specifically, think about:
- Interest Rate Changes: Firstly, if you opt for a variable-rate mortgage, be prepared for potential interest rate increases.
- Income Fluctuations: Secondly, your income as a self-employed contractor can, inevitably, fluctuate. Therefore, ensure you have a buffer in your budget to accommodate these changes.
- Future Projects: Finally, consider your long-term career plans and how they might, potentially, impact your mortgage affordability.
By understanding these nine essential things, you’ll be, undoubtedly, well-prepared to navigate the CIS mortgage process and, consequently, increase your chances of securing the financing you need to achieve your homeownership dreams. Remember, professional advice is, undeniably, invaluable. Therefore, don’t hesitate to consult with a specialist mortgage broker who understands the intricacies of CIS mortgages.
For more information about CIS mortgages in 2025, get in touch with one of our expert advisors.
Multi-Award Winning:
Winner: 2022, 2023, 2024
Useful Links
Why Albion Forest?
- Raising The standards of financial advice
- Making financial advice accessible to all
- Trusted & stress-free financial advice
- Friendly, personable advisors
