How To Get A CIS Mortgage
The definitive guide to getting a CIS Mortgage.
Construction workers may be eligible to obtain a mortgage under the Construction Industry Scheme (CIS). If you do not have a three-year account or your salary is low, then a CIS mortgage may be an option. As a builder, you have come to the right place. How to get a mortgage as a builder in this tutorial. When you are ready to apply for a mortgage, we are happy to let you get in touch with a mortgage expert.
What is a CIS Mortgage?
The Construction Industry Plan (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)
- Taxes on the system are reduced by 20%
How Much Can I Lend 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 advance 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, but we recommend aiming for a deposit of at least 10.
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 account for getting CIS Mortgage?
If you are registered in the system, lenders only need your payslips as proof of your income.
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. The advisors we work with specialize in bad credit and can explain everything to you in more detail.
Just ask and a specialist will call you back.