Navigating the Construction Industry Scheme Mortgage: What You Need to Know
Tuesday 27 August, 2024
In the world of mortgage options, one niche possibility stands out for those involved in the construction industry: the Construction Industry Scheme (CIS) mortgage.
This specialised mortgage is tailored to the unique needs and circumstances of contractors, subcontractors, and construction workers. While it can offer significant advantages, navigating the intricacies of a CIS mortgage requires a thorough understanding of its key features and considerations.
Understanding the Basics of CIS Mortgages
The Construction Industry Scheme (CIS) is a government initiative in the UK aimed at regulating tax payments for construction workers. Under CIS, contractors deduct money from a subcontractor’s payments and pass it to HM Revenue and Customs (HMRC) as advance payments towards the subcontractor’s tax bill. CIS mortgages are designed to accommodate individuals whose income is generated through the CIS.
Benefits of the CIS Mortgage
CIS mortgages offer several benefits tailored to the unique financial circumstances of individuals working within the construction industry:
Flexibility in Income Assessment: Unlike traditional mortgages, which often rely on stable and verifiable income sources, CIS mortgages consider gross earnings, including payments made under the Construction Industry Scheme. This flexibility allows contractors and subcontractors to demonstrate their ability to afford mortgage repayments based on their total income, despite its irregular nature.
Tailored to Construction Industry Professionals: CIS mortgages are specifically designed to meet the needs of contractors, subcontractors, and tradespeople. Lenders offering CIS mortgages understand the nuances of the construction industry and structure their products accordingly, offering terms and conditions that align with the financial realities of construction professionals.
Potential for Higher Borrowing Limits: With CIS mortgages, lenders may be more willing to offer higher borrowing limits compared to traditional mortgages. By considering a broader range of income sources, including payments under the CIS, lenders can assess affordability more accurately, potentially allowing applicants to borrow larger amounts to purchase their desired property.
Deposit Requirements: Similar to standard mortgages, CIS mortgages often require a deposit, typically ranging from 5% to 20% of the property’s value. The specific deposit amount may vary depending on factors such as credit history and the lender’s policies.
Interest Rates and Fees: Interest rates for CIS mortgages may differ from conventional mortgages due to the perceived higher risk associated with irregular income. It is essential to compare rates and fees from multiple lenders to ensure you secure the most favourable terms.
Proof of Income: While CIS mortgages cater to individuals with non-traditional income sources, lenders still require evidence of income and affordability. This may include CIS statements, bank statements, and tax documents to verify earnings.
Credit History: A healthy credit history remains a crucial factor in mortgage approval. Lenders will assess your credit score to determine your creditworthiness and may offer better terms to applicants with strong credit profiles.
Seek Professional Advice: Due to the variable nature of construction work, financial planning is paramount for CIS mortgage applicants. Establishing a robust budget, maintaining emergency funds, and managing cash flow can help mitigate financial uncertainties.
Marian Isciuc, CIS Mortgage Broker Adviser in Harlow, Essex & Grays, Kent said:
“CIS mortgages provide a tailored and flexible financing solution for individuals working within the construction industry, offering access to homeownership opportunities that may otherwise be challenging to attain through conventional mortgage products. Navigating the complexities of CIS mortgages can be challenging, especially for first-time homebuyers or those new to the construction industry. Consulting with our team of professional mortgage brokers can provide valuable insights and guidance throughout the process.”
By staying informed and seeking professional advice when needed, aspiring homeowners in the construction industry can confidently navigate the path to homeownership with a CIS mortgage.
If you are currently a CIS worker and are looking for a new mortgage or to remortgage at the end of your existing deal, call our local mortgage broking team now on 01707 872000 for expert CIS mortgage advice.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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