CIS Mortgages – Construction Industry Scheme
CIS Mortgage topics covered below.
- How does a CIS Mortgage work?
- What is a CIS worker?
- Do I qualify for a CIS mortgage?
- Can I get a mortgage with 3 months CIS slips?
- How much could I borrow for a CIS mortgage?
- How much deposit will I need for a CIS mortgage?
- Can I get a CIS mortgage with bad credit
- Can I remortgage with CIS income?
- CIS – Case Study
- Can I get a CIS buy-to-let mortgage?
- CIS mortgage minimum criteria.
- Speak to a CIS mortgages advisor
Updated 29th August 2021.
CIS Mortgage Advisors.
Our Mortgage Experts Online accredited advisors are specialists in CIS mortgages. Subsequently, our expert’s knowledge will help you to find the right CIS mortgage on the market to meet your specific requirements.
From big high street banks and building societies, to smaller more niche mortgage lenders, there is a lot of choice out there. Subsequently, this may feel completely overwhelming to you. Likewise, you may have no idea where to start. We can offer you guidance and help you navigate the complex world of CIS mortgages.
The brokers we work with are whole of market and offer completely unbiased advice, ensuring that you get the absolute best deal available.
Scroll down for more information and FAQ’s.
How does a CIS mortgage work?
Through the CIS scheme an overseeing contracting organisation who are responsible for the management of subcontractors. The subcontractor pays tax in advance to HMRC which is stopped at source. Some mortgage lenders are able to consider the gross income instead of your self-assessment figure.
Despite this, you will submit a tax return to HMRC at the end of the tax year. When submitting your tax return, you will likely offset certain expenses against tax, such as fuel, tools, phone bills and accountants’ fees. This usually results in you receiving a tax rebate from HMRC. CIS mortgages are about presenting your income is the best way to the mortgage lender. Our CIS mortgages experts will go through the mortgage process step by step with you.
Most mortgage lenders will class you as self-employed and require a minimum of 2 or 3 years SA302’s or self-employed accounts. This means that most lenders are working off the lower declared income on the tax returns rather than the higher figure on the CIS vouchers. The upshot of this is that most CIS workers find it difficult to borrow the amount they need for a mortgage.
What is a CIS worker?
A CIS worker covers a wide variety of job roles. This can be a middle ground between being self-employed or employed. However, most mortgage lenders treat CIS workers as self-employed.
This is because the banks do not truly understand how to assess a CIS workers income, and the default option is to class you as self-employed. Thankfully, there are lenders who take a more sensible approach.
Generally, CIS workers will fall into one of these categories.
- Painter & Decorators
As long as the tax is stopped at source and the remittance slip shows this, then you will be eligible for a CIS mortgage and the right to be assessed on that basis.
Do I qualify for a CIS mortgage?
There are a small number of lenders who work slightly different when assessing CIS income. Our experts have access to lenders who take a common-sense approach to lending for CIS mortgages. Instead of treating CIS income as self-employed income, they will treat the worker the same as being in an employed role and work off the higher figure on the pay slip before tax. So, the same criteria for employed people will be applied to you.
Previously you would have needed to show 3 years’ worth of accounts, thankfully this has now changed. You will need to show continuous employment and sustainability.
With over a quarter of the workforce working under a form of contracted employment, this has forced the high-street lenders to become more flexible in their approach to mortgage lending. Our mortgage experts will be able to advise you on which lenders will accept CIS income.
Instead of making the process of getting a mortgage for subcontractors complicated we aim to take away the stress from applying for a CIS mortgage.
Can I get a mortgage with 3 months CIS slips?
You will be required to produce a minimum 3-month CIS payslips and in some circumstances, this may increase to 6 months’ worth. The CIS mortgage lender will want to know about previous experience in the industry and sustainability in your current role. They can also ask for a letter from your current employer to confirm ongoing CIS work.
The mortgage lender will treat you the same way an employed person. If you’ve had previous adverse credit you will need to provide 12 months CIS slips. This will increase the potential amount you can borrow with a CIS mortgage lender.
This type of CIS mortgage will take an experience mortgage broker to ensure you get the maximum borrowing and the keep the process as simple as possible for you.
How much can I borrow for a CIS mortgage
Borrowers under The CIS scheme would be assessed in the same way as employed borrowers when it comes to affordability. Affordability with most lenders typically topping out at 4.5 x income. The actual amount of borrowing available will depend on factors including.
- Deposit levels
- Credit commitments
- Child-care costs
Lenders would average the last 3-6 months gross pay and use this figure to calculate the annual income. In some circumstances they may request 12 months vouchers, this is down to the underwriter and overall strengthen of the case. The stronger case that can be presented to the CIS mortgage lender, the better the chances of being accepted.
If you need to tell HMRC about your earnings, you can do so by clicking here
How much deposit will I need for a CIS mortgage?
With any mortgage the more deposit you have the better the options and interest rates will be. At present there are 5% deposit mortgages available through the Help to Buy scheme and some high street lenders Click here to read all about the Help to Buy scheme and all options available.
Ideally you would have 10% as a minimum deposit, at these cis deposit levels there will be more options. At 15% deposit this would give you the best options in terms of interest rates and more flexibility from the CIS mortgage lenders.
CIS mortgage lenders will also accept gifted deposits from family and in some instances friends. This varies from CIS mortgage lenders and needs to be discussed with your mortgage expert in the first instance.
Can I get a CIS mortgage with bad credit?
Yes, there are options for a CIS mortgage with bad credit. The severity of the bad credit will determine on the mortgage options available to you. The mortgage advisors we work with are specialist in arranging bad credit mortgages.
CIS mortgage lenders may still be able to provide a mortgage if you have bad credit. We would always advise you to check your credit report and get the latest copy for your mortgage advisor to look through.
If you have had minor credit issues, there are a few high street lenders which would still consider your application. For more recent and sever adverse credit, we would need to look at a specialist lender.
Kensington Mortgages will look at CIS income with 12 months of remittance slips and will accept defaults that have been registered over 24 months, they will also disregard communications defaults, phone bills, tv packages etc regard less of how recent they were. Kensington Mortgages only accept application through a specialist mortgage broker.
It’s important that you explain and declare all previous bad credit and give your CIS mortgage advisor all the information to ensure you get the correct advice.
To get a copy of your latest credit report click here.
Can I remortgage with CIS income?
You can remortgage with CIS mortgages. You might have been originally employed when taking out the mortgage and are now on the CIS scheme. Our experts will be able to explain all the options available around CIS mortgages.
If you are not eligible for CIS mortgages, then a product transfer might be the answer. To read all about remortgages click here.
Can I get a CIS buy to let mortgage?
The criteria for CIS mortgages buying a buy to let is simpler. Most lender only require 12 months trading history and evidence in the form of tax calculation & tax year overview.
Some lenders will have a minimum income figure. For the most up to date information contact us today. To read all about buy to let mortgages click here.
CIS mortgage minimum mortgage criteria.
- 3-6 months of CIS vouchers/slips
- 20% deducted at source and showing on the slips
- 5% minimum deposit
- Defaults/ CCJs to be registered over 24 months ago
Case Study – CIS Mortgages vs 1 years self-employed.
A client recently contacted Mortgage Experts Online looking for CIS mortgages. There were several issues the client came up against when trying to obtain a mortgage. Our experts have access to the whole of the market and are CIS mortgage specialists. They were able to assist the client and get the maximum borrowing available.
One of the clients was in a Debt Management Plan (DMP), the other was a (CIS) worker. They were able to find a lender who was happy with the credit profile, they were struggling to get the required affordability to achieve the loan amount they required.
The income broke down as follows.
Income 1 – £19,056.
Income 2 – £19,750.
Benefit income – £1,076.
Income 2 shows as £19,750 in the above scenario, this was taken off the self-assessment tax return (SA302) and tax year overview. The client had in fact earned £25,577 through the Construction Industry Scheme (CIS).
They were able to write off certain allowable expenses against their income. Such examples are mileage, tools and administrative costs associated with the running of his business.
Based on the one year’s self-employed income, the maximum the lender was willing to offer taking into account the clients ongoing credit commitments was £159,528.
How can a CIS mortgage expert help?
The specialist mortgage advisor looked at the figures and knew it was more preferential to look at borrowing against the Construction Industry Scheme income. They used the latest 12 months being evidenced on the Construction Industry Scheme vouchers. In total this gave a combined household income of £45,709. This mean that the maximum borrowing could be £205,690.
Looking at the Construction Industry Scheme income rather than the one years self-employed income gave the clients £46,162 additional affordability.
Certain costs had to be taken into account when using the Construction Industry Scheme income for assessing affordability (such as fuel costs which had been written off against tax), however this still gave a significantly greater loan amount when compared to the affordability being based on one years self-employed income.
Speak to a CIS mortgage advisor.
There are many lenders available ranging from high street banks and building societies to specialist lenders. We tend to find that most people go to their own bank, only to either find out they do not do CIS mortgages, get declined, or cannot borrow what they need due to lender affordability. However, just because one lender has declined you, don’t give up!
Our CIS mortgage experts will look at each case before deciding which lender is right for you and your individual circumstances. All the mortgage brokers we work with are whole of market and offer independent, unbiased advice. As such, they will have access to all the specialist lenders to really enhance your chances of you obtaining the CIS mortgage you need.
Therefore, the expert advisors we work with have experience in dealing with all aspects of CIS mortgages, and crucially use the whole of the market to access the best deals available.