How To Get A CIS Mortgage
A CIS Mortgage will focus on treating you employed rather than self employed. CIS Mortgages are not available from all lenders.
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Construction workers may be eligible to obtain a mortgage under the Construction Industry Scheme (CIS). If you do not have a three-year account history or your salary is low, then a CIS mortgage may be an option. This guide tells you everything you need to know about whether a CIS Mortgage is the right thing for you.
What is a CIS Mortgage?
The Construction Industry Scheme (CIS) was introduced by HMRC to allow contractors to withdraw funds from a subcontractor’s payments and pay them to HRMC. The deductions would then count as advances for the subcontractor’s tax and social security.
Contractors must register with the system, but subcontractors do not. If the subcontractors do not log into the system, the deductions will be deducted from their earnings at a higher rate. Payslips are usually provided to subcontractors showing their gross and net income.
How do CIS mortgages work?
CIS mortgages are helpful as the self-employed sometimes struggle to get a mortgage as many sole proprietorships write off as much of their income as possible to pay less tax.
Because lenders generally rate affordability based on net earnings numbers, mortgage amounts on offer are typically lower than expected.
A CIS mortgage allows lenders to calculate affordability using gross income numbers rather than net income numbers. It can increase the amount of the mortgage that you can borrow.
Do I qualify for a CIS mortgage?
It is necessary to understand that not all lenders offer CIS mortgages. Lenders who do this have different criteria and rate applicants on a case-by-case basis.
Generally, each lender needs the following:
- 3-6 months of CIS payment slips (typically six months)
- 3-6 months of bank statements (typically six months)
How Much Can I borrow for a CIS Mortgage?
The lender calculates your creditworthiness based on your average annual income. To do this, lenders will request 12 months or 3-6 month pay stubs from your most recent payslips. In both cases, lenders use the gross amounts to calculate your average annual income.
After lenders determine your average annual income, they will offer you a loan amount based on their criteria. Lenders typically lend up to 45 times the applicant’s annual income.
Your expenses are noted as well as any other financial arrangements you have such as loans, mortgages, and outstanding credit cards.
How much deposit is required for a CIS mortgage?
With a higher mortgage deposit, you can certainly choose between better mortgage rates. It is possible to get a mortgage with a deposit of 5%.
Larger deposits often result in better mortgage rates. If possible, a deposit of 15 would be ideal and anything higher is a bonus.
Do I need an accountant for getting a CIS Mortgage?
If you are registered in the system, lenders only need your payslips as proof of your income.
Alternatively, if you are not registered, you may need to submit accounts for at least one year in addition to an SA302. Other lenders require at least three years of professional experience.
If you are not a subscriber, your affordability will be based on your reported net income numbers. As a result, the maximum amount of your mortgage will be less compared to registering with the CIS. This can be beneficial for self-employed construction workers.
What if I have bad credit?
If you need a bad credit CIS mortgage, there may be some lenders willing to approve it. Generally whether you can get a mortgage with bad credit will depend on:
- How long ago the bad credit was
- What it was for
- How much it was for
- Is it paid off
How is cis mortgage calculated?
Most lenders will ask for either, 3, 6 or 12 months of payslips and will then multiply that by between 4.5 and 5.5x to give you a maximum amount you can borrow.
Some lenders may treat you as self employed in which case they will usually want to see your latest 2 years accounts. However, some lenders are more subcontractor-friendly, using your gross income rather than your net income.
Can I get a mortgage with 3 months CIS?
Generally lenders tend to want 6 months of payslips for a CIS Mortgage. However, you may be able to get a mortgage with as little as 3 months payslips as a CIS worker.
Only a few lenders will consider CIS workers with so few payslips, and most will treat you as self employed and want a few years of trading, so it’s worth speaking to a specialist mortgage broker who can go through your options.
Can subcontractors get a mortgage?
Subcontractors can find it difficult to get a mortgage. This mostly comes down to the fact that most lenders will think of them as self employed and require 2 years plus of evidence of income.
However, there are lenders that will consider as little as three months of evidence of payslips for a CIS Mortgage.
Is CIS classed as employed?
This will depend on the lender. Most lenders do consider CIS as self employed. However, some lenders will treat you as employed, and multiply an average of your weekly gross income in order to work out how much you can borrow.
This can work out very beneficial for CIS contractors to get a better maximum loan, or a better affordability for their mortgage.
Is it hard to get a mortgage with CIS as a contractor?
Contractors can find it incredibly difficult to get a mortgage. This is down to a lot of lenders not really understanding how their income is calculated.
However, there are a few lenders that will consider you employed and base your income on a multiple of your gross weekly income. This can make a huge difference to the amount you can borrow.
CIS Mortgage Calculator
It will usually take us less than 10 minutes to tell you. (And we won’t charge you a penny to do so.)
CIS Mortgage lenders
There are many different lenders for CIS workers, and which one is right for you will depend on your entire situation.
For a full list of lenders we use get in touch to discuss your options.
Got a question we haven’t answered? Get in touch and we’ll answer it and likely add it to this article to help others!
A mortgage article by Mark Robinson – Mortgage & Equity Release Broker