If you work in the CIS Construction Industry then you will need a CIS Mortgage Scheme, then please read on
The Construction Industry Scheme is technically a sub-contractor set up. In this article, we will discuss the CIS Mortgage Scheme and how Lenders view it in terms of their mortgage affordability assessments and products.
Before we move onto the CIS Mortgage Scheme first some further background for those unfamiliar with the Scheme: The main contractors of the build deduct money from the sub-contractors pay packet and send it on their behalf to HM Revenue and Customs (HMRC). The onus is on the sub-contractors to register if they expect to be basic rate taxpayers otherwise the CIS scheme will deduct at the higher rate.
What build projects are covered by the CIS Scheme?
The CIS Scheme covers almost every type of construction work, including • Permanent or temporary buildings and structures. • Laying foundations. • Access works. • Demolition. • Alterations, decoration and repairs. • Installation of power, heating, lighting, water and ventilation. • Tidying up the site afterwards.
Construction industry experience is one of the main contributory factors when looking for CIS Scheme Mortgage. The common stance for Mortgage Lenders is one to two years’ CIS Scheme experience. You’d think it would go without saying the more CIS experience the better your mortgage chances. This is the case for most Lenders but it can be counter-intuitive as if you are a CIS worker for over a period, typically 18 months some CIS Scheme Mortgage Lenders will change their assessment from the advantageous “employed” formula which reflects current levels of pay to full blown “self- employed” with income averaged across years – the net result being less borrowing potential.
How is income assessed?
If the CIS Scheme Mortgage Lender treats you as “employed” they will work from your payslip vouchers after taking off any expenses. They would invariably look for common ground or take an average across the last three to twelve months. Closer scrutiny of the terms of CIS Scheme employment is likely and if the sub-contract has a fixed end date; past renewals and length left on the current contract play a part in the CIS Scheme Mortgage Lender’s underwriting decision. Multiple contracts could also push you onto the “self-employed” CIS Scheme assessment path.
If the CIS Scheme Mortgage Lender treats you as “self-employed” then they are likely to want the last two to three year’s self-assessment tax returns with accompanying tax year overviews to ensure tax has been collected and paid. As an extra step they may also ask for the last three months’ business bank statements to check the work is still coming in at the same level.
Can I have moved main contractors/employers?
Yes, the main thing is continuous employment in the Sector, and typically this must be for 12 months.
How much can I borrow?
Normally 4 to 5.5 times your income after your expenses have been subtracted. The scale is subject to whether you are a first time buyer, next time buyer or remortgaging; the level of personal of debt; mortgage size; number of dependents; deposit size and mortgage term length.
What mortgage rates are available?
There are a number of mainstream Mortgage Lenders that will provide a CIS Scheme Mortgage so the mortgage rates and terms should be competitive.
What is the minimum deposit?
A 5% deposit will be needed for standard mortgages and Help to Buy. Shared ownership is likely to need 10% deposit.
What if I have had past credit problems?
This may still be possible. How severe and recent the issues will be the main contributory components to rate and deposit size needed.
What are my chances of being accepted?
There is a very good chance if you have a twelve month track record of CIS Scheme working provided you select the right Mortgage Lender. I would suggest you seek professional Mortgage Broker help from an established firm such as Niche Advice to maximise your potential.
CIS Mortgage Scheme Typical Requirements Summarised
- Purchases and remortgages.
- Competitive “high street” mortgage rates.
- Options with 5% deposit.
- Standard mortgages, Help to Buy and Shared ownership are all possible.
- Three month with current Main Contractor, and 12 months continuous employment in the Sector.
- Mortgage Lenders that work from payslips.
- 1 year’s accounts considered.
- Income multiples 4 to 5.5 times.
- Poor credit history may be acceptable.
- Mortgage Lender choice is important.