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As a construction subcontractor you might worry about getting a good mortgage. Fortunately, a CIS Mortgage is designed to help you get a fair deal.
It’s a well-established belief that it’s harder for the Self-Employed to get a mortgage. Some mortgage lenders are concerned about variable income when you work for yourself.
This situation is improving, however, and particularly so if you work in the construction industry. There are many contractors and subcontractors working in this sector who generally have good levels of income and successful businesses.
As a result, various mortgage lenders now offer special mortgages for subcontractors that are registered with the Construction Industry Scheme (CIS).
A Construction Industry Scheme mortgage allows you to base your mortgage on your gross income – before tax and national insurance. This usually means better mortgage rates and a higher value loan.
If you’re a Self-Employed worker who has signed up to the Construction Industry Scheme, you can apply for CIS mortgages.
Lenders will be looking for you to meet a few criteria, however. You will usually need at least a 5% deposit, have been Self-Employed for at least a year, and have worked in the UK for over three years.
The first step is to find a CIS Mortgage lender. Various banks and building societies offer them, but it’s not always that easy to compare the criteria and understand whether you meet them. Mortgage Advisors like Momentum Mortgages can be helpful in identifying lenders that might suit your individual circumstances.
The next step is to show your chosen lender proof of income. How you do this will depend on each bank and how they approach CIS mortgages.
If they consider you to as Self-Employed, you might need to provide your yearly accounts or an assessed tax return stating an income figure. Some lenders will see you as a contractor, and ask for details of your current contracts. You will probably need to show recent CIS payslips.
CIS mortgages aim to offer construction subcontractors unique and positive mortgage deals. CIS workers could find that they are offered a higher loan value than with a standard mortgage, or that their annual income is based on pre-tax earnings.
In general CIS Mortgages are worth exploring if you’re a registered subcontractor, but there are some potential disadvantages to consider too.
As with any financial product, it’s important to compare your options carefully. Make sure you can easily afford the repayments on your mortgage, and always consider the fees and charges as well as the monthly interest rates.
Any financial lender will look at your credit score before approving you for a loan. But even if you do have poor credit, a CIS Mortgage gives the company lender knowledge of how your business is doing.
So if your business is performing well and your credit issues happened a few years ago, some mortgage companies will continue to offer you a competitive deal. More serious credit issues such as bankruptcy or unpaid CCJs could limit your chances, however.
Comparing mortgages is time consuming and can be complex. Plus, not all CIS mortgage lenders advertise directly to the public – some are only accessible via brokers.
At Momentum Mortgages, our mortgage advisers are specialist mortgage experts. We have helped many CIS members find competitive mortgages and buy themselves a home.
Our advisers will get to know you and your business, exploring all aspects of the deals on offer to help you achieve your property goals.