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What is the CIS scheme and can I get a CIS mortgage?
CIS stands for construction industry scheme. This is a scheme that is applied for by construction companies to pay their contractors whilst deducting a percentage of earnings to pay their tax bills. This is 20% for registered contractors.
This helps to ensure that the fixed term contractor has money to pay their tax bill at the end of the year. The contractor then submits a tax return at the end of the year confirming what the expenses have been, with the Inland Revenue confirming the difference.
Some lenders can consider applicants on the CIS scheme using the payment documents given to them by the employer. Some lenders however are not so good at this and use the tax calculations from the tax return to determine the applicant’s income.
This could result in a different loan amount for a longer period of employment needed to get the satisfactory amount of self-employed history required by that individual lender.
An experienced mortgage adviser would be able to tell you how each lender will treat your income when you are paid through the CIS scheme.
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How long do I need to have been on the CIS scheme to get a CIS mortgage?
Different lenders have different rules around how long you need to have been a CIS worker before they will offer you a mortgage.
Some lenders can consider a shorter period on the CIS scheme, such as six months. This would mean that the lender would be looking at 6 months’ worth of CIS payslips to work out what they believe your income is. This is usually taken as an average over this.
Some lenders do not like working this way and will treat your application like that of a self-employed worker. This would mean that you need to show your tax calculations and tax year overview statements if you submit your tax return as a sole trader. As a result, lenders would be requiring you to have been trading a minimum amount of time, for example, 2 years.
There are however lenders that can consider shorter periods in self-employment, for instance, with only 1 year of trading history.
This lender will likely need to know what you were doing before to be comfortable that your self-employed income is sustainable due to your experience in that role.
Your mortgage adviser would be able to guide you about the lender’s requirements.
Can you get a CIS mortgage for buy to let?
People that work on the CIS can apply for buy to let mortgages.
Some buy to let mortgage lenders may have minimum income criteria which need to be met for them to offer you the mortgage. £25,000 is a common minimum income threshold for buy to let lenders.
Depending on how each lender treats the CIS income, it may also be a requirement for you to have been working for several years so they can assess it on a self-employed basis. Not all lenders do this, so some will work off the CIS payslips.
There are also buy to let lenders that do not have a minimum income criteria at all as long as they are comfortable with the overall application and the rent passes the lender’s rental stress test. Your mortgage advisor should know which lenders will be available to you depending on your income situation from the CIS scheme.
Can you get a CIS mortgage if you have bad credit?
It is possible to get a mortgage if you are on the CIS scheme, even if you have bad credit.
Some High Street lenders can consider people with bad credit depending on the situation and circumstances.
There are also Specialist Lenders that can consider people with adverse credit.
Your mortgage adviser would need to understand what credit consisted of and the full details of your CIS income. With this information, they could look for a lender.
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Do I need to do a tax return to get a CIS mortgage?
If you are a CIS worker, and not on the payroll of the company that provides your work, you will need to submit a tax return each year.
A percentage of your income will have been deducted for tax but submitting your return, calculates your full income including the correct tax bill and national insurance liability.
You should talk to an accountant who can give you advice about tax returns, national insurance and allowable expenses.
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Do lenders lend less for a CIS mortgage?
You will not necessarily be lent less because you are on the CIS scheme.
With lenders that can use the CIS payslips, it is sometimes the case that they may lend more than they would have done if you had given them a tax calculation showing a lower profit due to expenses that had been offset against the return.
Lenders will usually use a similar income multiple to what they were if you were fully employed.
You should talk to your mortgage advisor who could give you an idea of what you can borrow taking into account the way that you receive your income.
What documents do I need to provide for a CIS mortgage?
It will depend on the lender’s requirements as to which documents they will request when underwriting your mortgage.
For the lenders that use the CIS payslips, they will likely want to see 6 to 12 months of these documents.
If they treat you like a standard self-employed applicant, they will likely ask for tax calculations and tax year overview statements to verify the income that has been declared. Lenders will also likely ask to see your bank statements to verify the income that you receive.
Your mortgage adviser would be able to confirm to you which documents will be required when they know the full situation and which lender they are looking to approach.
Do you need a special mortgage adviser for a CIS mortgage?
You may not necessarily need a certain type of mortgage adviser to arrange a mortgage if you are on the CIS scheme, however, it would be recommended to look for a mortgage adviser that has experience in arranging CIS mortgages.
Depending on the lender, they may be working off either CIS payment documents for a certain amount of time or tax paperwork from the Inland Revenue.
Your mortgage advisor would need to know which lenders assess the income using which documents so some experience in CIS mortgages would be beneficial.
It is certainly possible to get a mortgage if you are paid through the CIS scheme. Different lenders treat applicants differently, so finding a mortgage adviser with relevant experience is always prudent.
Some lenders can offer buy to let mortgages and adverse credit mortgages for CIS workers.
For any of the above, speak with a qualified mortgage adviser that can tell you your options.
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