If you’re a Construction Industry Scheme contractor (CIS), you and your partner may struggle to find the right mortgage. This is because most high street banks require two or three years accounts in order to provide you with a sufficient mortgage. However, with CIS mortgages, the amount you borrow can be calculated based on your CIS day-rate before tax, instead of using an average of your last two year’s self-employed income.
The main advantage of CIS mortgages is that they allow construction industry workers to borrow more on their mortgage than they may otherwise be able to with a traditional high street lender.
Who is eligible for a CIS mortgage?
You need to be registered with the Construction Industry Scheme (CIS) to be eligible for a CIS mortgage. Once you are CIS registered, you can start to benefit from a CIS mortgage, as long as you fit the following criteria:
- Less than one year self-employed
- Have a 5% deposit
- Worked less than three years in the UK
- On a high day-rate but low net profit
You can also get a CIS mortgage with bad credit, too. Many mortgage lenders will still be willing to offer you a great deal, provided that you have had no defaults or CCJs in the past 24 months.
Why choose CIS mortgages?
With a CIS mortgage, individuals registered with the Construction Industry Scheme (CIS) can obtain a more sufficient mortgage, even if they’ve only been a subcontractor or self-employed for less than a year. This is because the amount you can borrow is based on your net income, rather than your net profit – which can be highly beneficial for construction workers.
Many construction workers write off expenses against their income for tax reasons, which reduces their net profit and ultimately the amount that a traditional mortgage provider will lend them. But, when it comes to CIS mortgages, instead of providing three years’ worth of accounts, you only need to show your net income from your payslips.
Benefits of CIS mortgages
With CIS mortgages, if you write off expenses for tax purposes, there’s a chance that you might be approved for a larger mortgage amount with CIS mortgages. You may also be approved for a good rate, even if you have a poor credit score.
Types of mortgage
The type of mortgage can also impact the rate you get.
Fixed rate mortgage
A fixed rate mortgage is where you pay the same amount at the same rate for a set period of time, usually between 2 and 5 years. Your rate remains the same regardless of changes in the lender’s or Bank of England’s interest rates. At the end of your fixed rate deal, you’ll fall onto your lender’s Standard Variable Rate (SVR) which is often a higher rate than you were paying. It’s often good to ensure you have a new produce in place before this ends.
A tracker mortgage quite literally tracks the Bank of England base rate and increases or decreases your mortgage interest rate as it rises and falls.
For example, if the BofE base rate is at 0.75% and the lender applies an additional 1.25%, your mortgage interest rate will be 2%. Should the base rate rise to 1%, the lender will continue to apply their 1.25% and your mortgage interest rate will be 2.25%.
Things to consider
As with every financial decision you make, its important that you consider every aspect of it – good and bad. Because even though CIS mortgages have some significant benefits, there are still things to consider when it comes to the mortgage option. For example, in some cases, it may be true that traditional lenders will be able to offer you a better mortgage rate. You may also find that there are a limited number of providers that offer CIS mortgages.
We can help with CIS mortgages
With a CIS mortgage, you can calculate how much you can borrow based on your CIS day-rate before tax, instead of using an average of your last two year’s self-employed income, which most banks will ask for.
If you are registered with CIS and have struggled to find the right mortgage for your needs in the past, rest assured that we are a mortgage broker that can help you find the best CIS mortgage so that you can finally find the right mortgage.
Even if you’ve had a few minor blips in the past with credit, or are yet to complete your first self-assessed tax return, we can still help find a mortgage with a larger amount. If you want CIS mortgage advice, contact The Mortgage Consultancy today.