CIS mortgages can seem confusing, but they don’t have to be. Here at Jones and Young, we’re here to help you understand your options and make the best decision for your unique financial needs. In this blog, we’ll be sharing some of our best practices for navigating CIS Mortgages and our top tips for getting approved. Let’s get into it.
What Is a CIS Mortgage?
CIS mortgages are a type of financing designed specifically for self employed construction workers. The term stands for Construction industry scheme and is a way to access financing without the same strict requirements as traditional bank mortgages. Essentially, you’ll be able to use your CIS statements like pay slips, which will increase your chances of borrowing the money you want to.
How Do CIS Mortgages Work?
Traditionally, construction industry scheme (CIS) workers struggle to get a mortgage due to their gross and net income. As they’re self-employed, CIS workers will often write off expenses to reduce their taxes. However, this results in a lower net income overall. With a CIS mortgage, lenders consider your gross income, which helps improve your affordability.
To qualify for a construction industry scheme mortgage, you’ll need to be able to provide proof of income through bank statements and CIS payslips. Most lenders require you to have been working in construction for industry for 2 years employed or self employed.
Who Can Qualify For a CIS Mortgage?
To qualify for a CIS mortgage, you’ll need to be receiving payments through the construction industry scheme. If you’re in the construction industry, you’ll know that this scheme is a UK government initiative that operates to ensure that self-employed sub-contractors, who are working in the construction industry, get paid promptly and properly.
If you’re eligible for payments through this scheme, then you may be able to qualify for a related mortgage. It should also be noted that you don’t need to have been running your own business for a long period of time – many lenders are willing to consider applications from those who have been self-employed for less than one or two years. However, each lender will assess your application on an individual basis, and the final decision is down to their discretion.
Will I Require Any Accounts?
You’ll also need to be able to provide proof of income, as most specialist lenders will require the following:
- 3-6 months CIS payslips (6 months is preferred)
- 3-6 months bank statements (6 months is preferred)
- Tax on the scheme must be deducted by the main contractor
A specialist mortgage broker, such as us here at Jones and Young, will help to present your income to CIS mortgage lenders. We’ll work out your average monthly income, as well as average annual income to estimate what you’d be able to afford.
What Are The Benefits of a CIS Mortgage?
Mortgages for CIS workers are popular for a variety of reasons. Let’s take a look at these in more detail:
Higher Borrowing Amount
As lenders will be looking at your gross income rather than net, you may be able to borrow more if you’re a member of the CIS scheme. This is because it accurately reflects your earnings and could help you purchase a larger property, as well as increase your chance of being accepted.
Apply With Fewer Accounts
Most lenders require 1-2 years’ worth of annual accounts to approve you for a mortgage. With CIS mortgages, we know lenders that only require 3 months’ worth of CIS statements! The mortgage calculation will be based on your average income in these three months. This can be very beneficial if you have recently completed a lot of over time.
Better Rates and Deals
As you can borrow more, you’re likely to get access to better deals than you would have previously. This can help you afford a larger property or have some flexibility with the different mortgage options you choose.
How Much Can I Borrow For a CIS Mortgage?
As a general rule, the amount you’ll be able to borrow will be around 4-5 times your annual income. This is calculated as gross income rather than net, as the lender treats you more like an employee.
It is important to remember that the amount you can borrow will vary depending on which lender you choose. Not all lenders will have this set amount, as some may require a larger deposit, or others may have higher monthly payments.
How Much Deposit Will I Need For a CIS Mortgage?
As a general rule, most lenders will require you to have a 10% deposit. This is similar to a standard residential mortgage, and this figure may differ depending on the lender that you choose.
However, as a specialist mortgage broker, we have access to lenders that only require a 5% deposit. That’s right; you can now get on to the property ladder with only 5% of the purchase price! As mortgage brokers, it’s our job to secure you the best deal that we can through our wide range of connections. Let us help you to secure the CIS mortgage you deserve!
What If I Have Bad Credit?
Bad credit doesn’t have to be the end of the world. Whilst it may make the traditional mortgage application process more challenging, we have access to a wide range of lenders who will accept CIS workers with bad credit. If you need further advice on the subject, please get in contact, and one of our advisors will call you back.
Related Article: Can I Get A CIS Mortgage With Bad Credit?
Bringing It All Together
At Jones and Young, we’re here to make the CIS mortgage process as easy as possible. By working with a specialist mortgage broker, you’re able to compare the best options for your unique situation and make an informed decision. We’ll present your options to you in an easy-to-understand format, so you can feel confident making the right choice. Not only this, but we also have access to exclusive deals that are unavailable on the wider market, allowing us to secure you the best deal. We hope that this guide has provided you with the information and guidance you need when it comes to navigating the CIS mortgage process.
If you have any questions or would like to get started, please get in touch with us today!
CIS Mortgage Advice FAQs:
We’ve answered some of the most frequently asked questions about CIS mortgage advice below:
No, getting a mortgage on the CIS scheme doesn’t have to be a challenge. We only require 3 months’ CIS statements as proof of your gross average monthly income rather than the end-of-year calculation from a self-assessment tax return. With this information, we’re able to secure you the best mortgage deal out there.
Mortgages for CIS workers are calculated using 3-6 months’ worth of CIS statements. They’re used the same way as pay slips to estimate an annual income figure that is representative of your salary. Lenders offer cis mortgages based on this figure and will require anywhere from a 5% deposit. View our CIS Mortgage Calculator for more information.
You’ll usually need the following for a CIS mortgage:
CIS pay slips – Usually between 3-6 months worth.
Age – Lenders usually prefer applicants to be between 18-75.
Deposit – Typically, the higher your deposit amount and the better your loan-to-value ratio, the more you can borrow.
Credit history- Most lenders require a good credit history, although there are options available if you have bad credit.
Find out more about Self Employed Mortgages.