CIS Contractor Mortgages: How to Secure a Mortgage as a CIS Contractor

For CIS (Construction Industry Scheme) contractors, securing a mortgage can feel like navigating a maze. Unlike standard employees, CIS contractors face unique challenges due to variable income and employment structures, which often make traditional mortgage options seem out of reach. This guide provides all the essential information on CIS Contractor Mortgages, explaining how these work, what lenders look for, and the steps to take for a successful application.

What is a CIS Contractor Mortgage?

CIS Contractor Mortgages are specialised mortgage products designed to support contractors who work under the CIS, often in the construction sector. Lenders who provide CIS mortgages take into account your gross income (before tax deductions) rather than net income, making it easier for contractors to qualify based on their earnings.

How Does CIS Affect Mortgage Eligibility?

CIS contractors typically receive payment after a 20% tax deduction, which is recorded on their CIS statements. Many lenders recognize this income structure and allow contractors to use their gross income as evidence for mortgage applications. This approach is beneficial because it aligns with how contractors are actually compensated and increases borrowing potential as opposed to being treated as self-employed for mortgage purposes.

Benefits of a CIS Contractor Mortgage

1. Higher Borrowing Capacity: CIS mortgages often calculate based on gross income, allowing for a larger mortgage amount than standard self-employed mortgages.
2. Less Paperwork: With CIS mortgages, some lenders may only require 3-12 months of CIS statements, rather than full self-employed tax returns, making the application process more straightforward.

What Documentation you’d expect to provide for a CIS Contractor Mortgage

To qualify, most lenders will typically require:

• Proof of Income: 3 to 12 months of CIS statements or payslips depending on the lender.
• Bank Statements: Three months’ bank statements to verify income deposits.
• Credit History: A good credit score; however, options exist for those with adverse credit.
• ID and Address Verification: Standard identification documents.

How to Improve Your Chances of Approval

1. Maintain Good Credit: Timely payments and responsible credit use can improve your credit score.
2. Keep Detailed Financial Records: Accurate CIS statements and bank statements give lenders confidence in your income stability.
3. Work with a Specialist Broker: Mortgage brokers experienced in CIS contractor mortgages can connect you with lenders who understand CIS structures and may offer favourable terms.

Common Challenges and Solutions

• Income Variability: CIS contractors often face seasonal or fluctuating income. Solution: Provide consistent bank deposits from your contracting work, which helps demonstrate reliable income.
• Limited Work History: Some contractors may only have a short employment record. Solution: Focus on lenders who consider three to six months of CIS statements.
• Adverse Credit: Missed payments or defaults can reduce mortgage options. Solution: Work with a broker to find lenders who accept applicants with credit history issues.

FAQs About CIS Contractor Mortgages

Q: Can I get a CIS Contractor Mortgage with less than 12 months of income?
A: Yes, some lenders will consider 3 months of CIS statements, especially if other aspects of your financial profile are strong.

Q: Are CIS Contractor Mortgages available for those with bad credit?
A: Yes, but it may affect your interest rate. Specialist brokers can help connect you with lenders that accommodate adverse credit histories.

Q: Do I need a larger deposit as a CIS contractor?
A: While it’s not mandatory, a larger deposit can improve your chances of approval and may lead to more favourable terms.

Q: Can CIS contractors get an interest-only mortgage?
A: Interest-only options are available, but they may require a detailed repayment plan to prove you can pay off the mortgage at the end of the term.

Conclusion

Securing a mortgage as a CIS contractor doesn’t have to be challenging. With the right approach and a focus on lenders who understand the CIS structure, you can find mortgage solutions that meet your needs.