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Author: Elliott Culley - Director & Mortgage Adviser of Switch Mortgage Finance
If you are on the HMRC’s Construction Industry Scheme you may have been struggling to find a mortgage lender that will consider you or you might have found the loan amount you could borrow below what you had hoped. This is because CIS contractors are treated differently by many lenders and you may need to apply with a CIS mortgage friendly lender.
Most CIS contractors who approach high street banks come away disappointed with what they can borrow. There are some lenders that assess your income in a much better way, which can be a real advantage to you.
If you are a CIS contractor, you will find the majority of mortgage lenders treat you as a self employed individual.
This means you will need to have worked as a CIS contractor for at least two years. However there are lenders that will treat you differently provided your tax is deducted at source and you have worked in the industry for at least 6 months. It can be a much easier process than you may think to obtain a mortgage as a CIS contractor, you just need to know where to go.
What is a CIS mortgage?
A CIS mortgage is specifically designed for individuals who are subcontractors. These are provided by CIS mortgage friendly lenders that apply a better understanding of your income.
If you have spoken to any mortgage lenders you may have found mosttreat you as if you were self employed and require you to prove two years income. This can be a problem if you haven’t been a subcontractor for 2 years. These lenders will also take an average of your earnings over the last two years. This can be problematic because it is likely your income has increased as you have gained more experience and qualifications.
However, there are CIS mortgage lenders that can need as little as three months income, provided you have a track record in the industry. Therefore if you are earning much better money now than when you first started you can really enhance your borrowing ability.
Can I get a mortgage with 3 months CIS payslips?
Yes, there are lenders that will consider a mortgage application using just your latest 3 CIS payslips.
Provided you are a subcontractor receiving payslips from an umbrella company it is possible to get a mortgage with your latest 3 payslips. However be aware you will need to have been working in your particular industry for at least 12 months.
Speak to an Expert!
Contact us today for expert advice and guidance on your unique mortgage and property needs. We will work with you on a one-on-one to basis to help you find the right solution for your needs.
With our experience you can rest assured that you are in good hands when it comes to securing the financing you need for your property.
Do I Need 2 years subcontracting to get a CIS mortgage?
No, you do not need 2 years history of working as a CIS contractor to obtain a mortgage. There are lenders that can consider as little as 6 months in a CIS contractor role. If you have worked in a similar line of work in an employed role, before switching to a CIS contractor role, you could be considered from as little as 3 months into your new CIS role.
You will have access to more mortgage lenders if you have worked for two years or more as a CIS contractor, however there are lenders available if you have not and they offer competitive rates.
Can I get a mortgage with less than 1 years subcontracting?
Yes, you can obtain a mortgage with less than one year as a CIS contractor. If you have worked in a similar line of work in an employed role, before switching to a CIS contractor role, you could be considered from as little as 3 months into your new CIS role.
However if your subcontractor role is a new industry with no previous experience, you will need a minimum 6 months history in the role.
The key is to approach the right lender as most will turn you away until you have two years tax returns.
CIS mortgage lenders
There are only a handful of mortgage lenders that treat subcontractors by payslip earnings rather than self employment figures. These will be the lenders you want to target if you want to maximise your borrowing potential.The mortgage rates offered by the majority of these lenders are competitive, so dont think just becuase you subcontract that rates will be worse.
How Much Can I Borrow With a CIS Mortgage?
Most mortgage lenders will calculate how much you can borrow by completing 4.49x your annual gross salary.
In the majority of cases you will be able to borrow a higher loan amount with lenders that assess your income from your payslips rather than your average income over the last 2 years.
If you have recently had an increase in your pay then there are some mortgage lenders that can consider assessing your income over the last 3 months. This can really increase the loan size available to you.
The lending figure will reduce if you have credit commitments like a car loan or credit card. The figure would also reduce depending on how many children you have or adult dependents that may live with you.
CIS mortgage calculator
Mortgage lenders will assess your income differently.
Some lenders will treat you as employed and some as self employed.
If a mortgage lender treats you as self employed they will take an average of your earnings over the last two years.
Other lenders can take the average gross of the last 3 – 6 months (before the CIS 20% deductions).
Therefore, the borrowing amount a lender could offer you, can differ wildly as the example below shows.
Example
Sam earnt £25,000 in year 1 and £45,000 in year 2. He got a promotion in the 6 months ago and is now earning £4000p/m gross income. He has no debts and no dependents.
Lender 1 (treats Sam as self employed so will take an average over the last 2 years) – £25,000 + £45000 = £70,000/2 years = £35,000.
Lender 2 (Uses Sam’s latest 6 payslips) – £4000 x 6 = £48,000.
With Lender 2 the amount Sam could borrow would be £216,000. That would be £58,500 more than lender 1. So choosing the right lender can have a huge impact.
How Much Deposit do I Need?
You can get a mortgage from as little as a 5% deposit. The higher your deposit the better interest rate you can achieve.
If you are looking to purchase a new build property or a flat you will need to provide a higher deposit of between 10-15%.
Can I get a CIS Mortgage as a First Time Buyer?
Yes, there are many mortgage lenders who are happy to offer mortgages to first time buyers on CIS contractors and we have helped many clients in this position. You need to ensure you apply to a lender that best suits your personal circumstances.
Can I Get a Buy to Let Mortgage as a CIS Contractor?
Yes it is certainly possible to obtain a buy to let mortgage if you are a CIS contractor. Some mortgage lenders do have a minimum income, which can be as high as £25,000 per year, but some require no minimum income at all.
If this is your first time being a landlord or you are a first time buyer, then there are some lenders that will not consider you, but there are plenty that will.
Can I get a CIS mortgage with bad credit?
Yes it is possible to get a CIS mortgage even with bad credit. If you do have some bad credit as a CIS contractor you will have a better chance if you have been in a CIS role for 2 years. However there are some lenders that can look at adverse credit with 12 months history in a CIS role.
There are many specialist lenders that consider different levels of bad credit and you will find there could be more options than you might think. Therefore we would always advise getting in contact to discuss your options.
Why Choose Switch to Help You?
Whether purchasing or remortgaging, you’ll want access to the best products on the market. We have a proven track record of helping CIS contractors and will be able to advise you on the best steps to take.
Why Switch Mortgage Finance
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