Construction Industry Scheme (CIS) mortgages are financial products designed with the subcontractor in mind.
If you are applying for a mortgage without the necessary three years’ accounts or with a low net profit, this scheme might help you get the funds you need. Using this scheme, lenders allow construction workers to use their gross income on their payslips rather than filed accounts.
What Is a CIS Mortgage?
If you have taken up a career within the construction industry and you are registered in the Construction Industry Scheme (CIS), you could obtain a CIS mortgage. Thanks to this scheme, you can use your net income rather than your net profit to apply for a mortgage. This normally means that you can borrow more than you think.
For self-employed individuals in the construction industry, this scheme can be extremely beneficial. Indeed, self-employed professionals often tend to declare the minimum taxable income in order to pay fewer taxes. However, by doing so, the amount they can borrow results in much lower sums than expected.
Instead, thanks to the CIS, the amount you borrow is based on the overall net income, which will allow you to borrow as much as you need.
Who Is Eligible For a CIS Mortgage?
If you have started working in the construction industry or you own a business that operates in the sector, you can register for the CIS. While it is not mandatory for professionals in the field to do so, by registering, you can save more money on taxes, as well as benefit from perks such as the CIS mortgage.
To benefit from the CIS mortgage, you will need to show at least six months of CIS payslips (with a 20% tax rate that is specific to CIS) and at least six months’ worth of bank statements. Then, to secure the mortgage, you will need to put down a 5% deposit as a minimum.
However, providing more than six months of bank statements and putting down a larger deposit can greatly benefit your application.
How to Apply for a CIS Mortgage?
CIS mortgages are an incredibly beneficial offer for those who work in the construction industry. However, not all lenders are ready to offer such a deal. If you wish to find those lenders who can help you benefit from the scheme, the best way is to contact a specialised mortgage broker who has experience in the field.
In terms of the application process, you won’t find much difference if you compare it to a traditional mortgage.
After you have applied via a lender or broker, the CIS mortgage providers will determine the amount you can borrow. To calculate this figure, they will multiply your annual net income by four or five – depending on specific circumstances.
How Do You Get a CIS Mortgage with Bad Credit?
If you wish to obtain a CIS mortgage, but you have a bad credit score, you might still be able to obtain a CIS mortgage. Indeed, if you have no defaults or CCJs in the past 24 months, most lenders will be able to offer you a suitable mortgage deal.
Pros and Cons of a CIS Mortgage
- Beneficial for workers and professionals in the construction industry
- It allows you to borrow greater sums than you normally would
- It can help you get a good rate even if you have been writing off expenses for tax purposes
- It can help you obtain good rates even if you have a bad credit score
- The process can be made much more straightforward through the help of a broker
- Traditional lenders might still be a more convenient option
- Only a limited number of lenders will offer you the CIS mortgage option
How Can a Specialised Mortgage Broker Help You Get a CIS Mortgage?
When it comes down to identifying the most suitable mortgage for your projects, it is crucial to understand all the financial products and options available to you. Many workers in the construction industry are not even fully aware of the benefits that subscribing to the CIS can bring.
So, leveraging the experience of a specialised broker can help you determine the best options for your specific situation, and streamline the application process.
Indeed, experienced brokers will know what lenders are ready to offer you the best deals, and they can get you in contact with them straight away.
Aside from helping you secure a mortgage within shorter time frames, such brokers understand the unique ins and outs of today’s construction industry, and they can assist you in securing the CIS mortgage you need.
Your home may be repossessed if you do not keep up repayments on your mortgage.