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Construction Industry Scheme mortgages

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 5th December 2019 *

UPDATED FOR 2019

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.

This article will serve as a guide to CIS mortgages and will also tell you how to get the best rates on one. The following topics are covered below...

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What is a Construction Industry Scheme mortgage?

A Construction Industry Scheme (CIS) mortgage is not a product in its own right but you might hear the term used when a contractor or subcontractor who's enrolled in the government programme is applying for a mortgage.

When signed up for the scheme, contractors deduct money from a subcontractor’s payments and pass it to HMRC so it can count as advance payments towards the subcontractor’s tax and National Insurance.

A mortgage lender will need to know that you are enrolled in CIS if you trade as a contractor as this will be relevant when it comes to assessing your income.

You can read more about the scheme on the government's website.

How do I qualify for a CIS mortgage?

To qualify for CIS mortgages you need the following:

  • 6 months CIS payslips
  • Tax on the scheme must be deducted at 20%
  • Minimum of 5% deposit

Is it harder to get a mortgage as a contractor?

It can be if you don't know where to turn for the right advice.

Self-employed mortgages, in general, can be more difficult to obtain, 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 tradesmen 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 six months' history.

Note: If tax is deducted at 30% then lenders often also require a review of business accounts and will take declared figures.

Which banks give mortgages to contractors?

Many of the UK's leading banks and building societies offer mortgages for contractors, but it's always worth speaking to an expert broker first, rather than going direct to a big name on the high street.

This is especially true if you have less then three years' accounts or your income is 'non-standard' because it may prove more difficult to find the best rates on the market.

By talking to a specialist broker with access to their entire market, you can rest assured that you'll be introduced to the right lender first time. Make an enquiry with us to get started.

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 £4,275 amount. Lenders will take the total sum of the last 12 months' payslips to establish the total of your personal income.

Typical lending figures would be based on approximately x4 this amount, but could be less if you have other monthly commitments such as other mortgages, loans and credit cards.

Assuming this borrower earned £4,275 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 payslip mortgage

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 CCJs in the last 24 months, you can still be accepted at top rates.

Still have questions about CIS mortgages? Speak to an expert!

If you’re having trouble finding a mortgage lender that accepts borrowers enrolled in the CIS scheme, let us know. The experts we work with can help you today - just get in touch. Speaking to a broker for a no-obligation chat won't cost you a penny, nor will your credit report be affected.

Updated: 5th December 2019
OnlineMortgageAdvisor 2019 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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