CIS Mortgage Advice for Construction Workers | Kerr & Watson
If you work under the Construction Industry Scheme (CIS), you might have experienced challenges when trying to secure a mortgage.
Traditional lenders often view CIS workers as higher risk due to irregular income patterns and self-employment status.
At Kerr & Watson, we specialise in understanding your unique circumstances and connecting you with CIS-friendly lenders who can help.
What Is a CIS Mortgage?
A CIS mortgage isn’t a specific mortgage product but rather an arrangement with a lender who understands the intricacies of CIS income.
Construction workers paid under the CIS scheme can use their gross income as proof of earnings, which can improve affordability assessments compared to traditional self-employed calculations.
Typically, CIS mortgages use your gross pay from CIS payslips instead of requiring tax returns or two years of accounts.
This method can result in higher borrowing limits, making it easier for construction workers to buy their dream home or invest in property.
Find out Your Options
How Do CIS Mortgages Work?
The biggest advantage of a using a lender that specialises in mortgages for CIS workers is that they will use your gross income rather than net profit.
This can be crucial, especially since many CIS workers deduct significant expenses, which lowers their reported net income for tax purposes. Here’s a closer look at how it works:
- Income Assessment: Lenders can review your CIS payslips to calculate your gross income. This approach helps you qualify for a higher mortgage amount.
- Proof of Earnings: Typically, you’ll need to provide 3-6 months’ worth of CIS payslips, possibly a year, bank statements, and evidence that tax is deducted at source by your main contractor. You may also need to show tax returns to verify your income has been declared.
Eligibility Criteria for a CIS Mortgage
Meeting the eligibility requirements for a CIS mortgage depends on a few key factors. Here’s what most lenders will look at:
Work Experience
- Length of Time in Construction: Ideally, you should have been working in the construction industry for at least two years. However, even if you’ve been subcontracting for less than a year, there are lenders who may still consider your application if you meet other criteria.
CIS Payslips
- Proof of Income: Most CIS-friendly lenders require 3-12 months of CIS payslips to verify your income. Some may accept handwritten vouchers, but many prefer digital or printed copies for verification purposes.
Consistency of Work
- Continuous Work: You’ll be in a stronger position if you have consistent work history with one or more contractors. Gaps in employment may make securing a mortgage more challenging.
How Much Can You Borrow with a CIS Mortgage?
The amount you can borrow depends on several factors, including your gross income, credit commitments, and the lender’s affordability criteria. Here’s a common rule of thumb:
- Income Multipliers: Most lenders offer between 4 and 4.5 times your annual gross income. For example, if you earn £40,000 per year, you could potentially borrow up to £180,000, depending on other financial commitments and dependents. This could be more, even 5 to 5.5 times your income with some lenders, in certain situations.
Bear in mind that factors like car loans, credit card debts, and the number of dependents you have may impact the final amount you can borrow.
How Much Deposit Do You Need?
The deposit requirement for a CIS mortgage can vary, but here’s a typical breakdown:
- Minimum Deposit: Many lenders require at least a 5% deposit, similar to standard residential mortgages. If you can provide a larger deposit, you may be more likely to secure a favourable interest rate.
- Visa Considerations: If you have a limited visa status, such as pre-settled or spouse visa, you may need a larger deposit.
What If You Have Bad Credit?
Having bad credit can complicate your mortgage application, but it doesn’t necessarily disqualify you.
- Minor Credit Issues: If you have minor issues, such as late payments, some lenders may still consider your application, even high street lenders offering prime rates.
- Major Credit Issues: More severe issues, like defaults or County Court Judgments (CCJs), will narrow your options. In this case, you may need to demonstrate financial stability over the past few years or even require a specialist lender.
Our team at Kerr & Watson has experience securing mortgages for clients with bad credit.
We’ll work to present your case in the best possible light and connect you with lenders who understand your situation.
Conclusion
Getting a mortgage as a CIS worker doesn’t always have to be difficult. With the right advice and lenders, you can secure a mortgage that reflects your true earning potential.
At Kerr & Watson, we’re committed to making the process straightforward and stress-free, helping you every step of the way.
Contact Kerr & Watson today to discuss your CIS mortgage options.
