Construction Industry Scheme mortgages
Published 18th August 2017
UPDATED FOR 2017
Struggling to borrow the mortgage you need because you don’t have 3 years accounts? Written off expenses and declare a low net profit? With Construction Industry Scheme (CIS) mortgages you can use the gross income on your payslips rather than your business accounts or self-assessment.
To qualify for CIS scheme mortgages you need the following:
- 6 months CIS payslips (updated for 2016)
- Tax on the scheme must be deducted at 20%
- Minimum of 15% deposit
The self-employed often find it hard to obtain mortgages, mostly because many sole traders will write off expenses against the income allowing them to pay less tax. Because lenders usually calculate affordability based on net profit figures, reducing the net profit on accounts can cause problems when it’s time to evidence what you can afford to borrow.
The good news is that tradesman and anyone paid through CIS where tax is deducted at 20%, can use the gross income figures on their CIS payslips so long as they have had 6 months history. (Note: If tax is deducted at 30% then lenders often also require a review of business accounts and will take declared figures).
How much can you borrow on a CIS mortgage?
With the payslip example below, the figures the CIS mortgage lenders use will be based on the ‘value of measured work’ figure, in this example it’s the 4275 amount. Lenders will take the total sum of the last 12 months payslips to establish the total of your personal income.
Typical lending figures are then approx. 4x this amount, but can be less if you have other monthly commitments such as other mortgages, loans and credit cards. Assuming this borrower earned 4275 every month, the total income would be 4275 x 12 = £51,300. With no other outgoings this person would be able to borrow approx. £205,200.
CIS mortgages with bad credit
If you have a history of bad credit there's still lenders that will consider your application. In fact, so long as you have had no defaults or CCJ's in the last 24 months, you can still be accepted at top rates.
Still have questions?
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