CIS Workers

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CIS Workers
CIS Workers

What is a CIS Mortgage?

Jadie and Tom talk to us about CIS mortgages.

What is a CIS mortgage and how does it work?

A CIS mortgage is specifically designed for clients who are paid via the Construction Industry Scheme through their employer. The employer takes the tax from their pay at source. The contractor is then responsible for organising their own tax returns and paying their National Insurance directly to HMRC.

It is specifically for clients who are employed within the construction industry, such as bricklayers, plasterers, carpenters and ground workers.

Just to add – it isn’t a CIS mortgage. It’s the CIS contractor that is the niche part of this scenario. They will still be placed with a normal mortgage lender, such as a high street bank, with standard products.

Who is eligible for this type of mortgage?

We’re specifically talking about clients who are employed in the construction industry and are paid via the CIS scheme. As a reminder, this is where the company you’re working for takes your tax either on a weekly or a monthly basis.

You are still responsible for doing your end-of-year tax return with HMRC to pay any additional tax or National Insurance that’s due. So the eligibility is solely clients who are employed under the CIS scheme.

Individuals will identify themselves as fitting within that scheme and disclose that to us, and as experienced mortgage brokers we would then know how to deal with them appropriately.

In the past we’ve had clients come to us who assume that they’re self-employed because they’re paid in this way. But because we deal with CIS workers on a regular basis we can ask those extra questions to see how you are paid and how a lender will view you.

Can self-employed workers apply for a CIS mortgage?

There are niches to self-employment, and some lenders may look at different types of client more favourably. Only a qualified broker would understand how best to place you to get the very best results.

Self-employed CIS workers can get a mortgage – we would just encourage them to speak to an advisor. There are some great lenders out there for a CIS worker and often people are surprised to find they can achieve such a good mortgage.

What are the benefits to someone who’s a CIS worker compared to someone getting a regular mortgage?

Certain lenders that will assess your income based on you being employed by the person that’s paying you. The benefit here is that the lender will look at your gross income before tax.

Other lenders may not be quite as favourable. They may actually view you as self-employed and look at your bottom line profit at the end of the tax year. Very often that profit is significantly less than the gross amount you would be paid weekly or monthly.

That’s the key benefit for somebody that’s paid within the CIS scheme. Again, it’s not a specific mortgage product for CIS workers, who have access to regular products. It is just how a lender views their income that can differ.

Are there any potential drawbacks or risks associated with CIS mortgages?

A common issue that we see with CIS workers is around seasonal work. For example, if you’re a bricklayer who can’t work during bad weather, you may sometimes see a period of a month or two where that income is lower. Perhaps in the summertime, where you’ve got more daylight, you can earn more.

We always make sure that the mortgage we’re recommending to that person is affordable throughout the 12 month period and we’re not relying too heavily on those months of the year where there’s more income.

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How do the interest rates and fees associated with a CIS worker getting a mortgage compare to other applicants?

The great news is that there is no difference. You will have access to the traditional mortgage products at the best rate for your particular circumstances. The associated fees would only be that of a standard mortgage – such as a lender arrangement fee, depending on the product your advisor has sourced for you.

There will also be the standard fees for solicitors and surveys. You’re not disadvantaged as a CIS worker in terms of the interest rates you’re exposed to. If you find yourself in that position, you haven’t spoken to the right person – we would encourage you again to speak to a broker that’s well versed in the CIS scheme.

There really are some great lenders out there for you, so speak to somebody who can find one of these for you.

What documents are required to get a mortgage as a CIS worker?

To give the most appropriate advice we would tend to ask for the last three months or 12 weeks of the CIS remittance pay slips from the people you’ve been working for.

We would also need the corresponding three months of bank statements to show the net payment going into the account. In addition, we tend to ask for the last couple of years of self-assessment returns. That will help us work out if it’s better to use your current pay slips as an employee or your profit figures from your tax calculations.

That’s the skill set we have here – to look at those documents and work out for the client which particular route is going to be best.

How can I find a reputable lender who offers CIS mortgages?

Speak to somebody who has experience of dealing with CIS clients. Find a mortgage advisor who has dealt with this in the past and understands how different lenders look at it.

The last thing you want to do is speak to whoever you bank with. It’s very likely they won’t understand the way a CIS worker is paid. They will only have one rulebook, where the outcome you get may not be the one you’re looking for. So absolutely do speak to an advisor who has experience of looking after CIS clients.

Are there any other unique features or requirements that a CIS worker should be aware of when borrowing to get a mortgage?

The key thing is that as a CIS worker, subject to the usual credit scoring and assessments, you’ll have access to a standard mortgage rate, standard product and standard fees.

You’re not going to be disadvantaged for being paid via the CIS scheme. Again, it really comes down to speaking to somebody who has the experience of helping clients who are paid this way.

How else can advisors help CIS contractors?

We’re here to look at the work you do, the sustainability of that work and the people that you’re subcontracting to. We also keep in mind that seasonality of work and make sure you’re not overborrowing based on three or four really good months.

There’s a whole, thorough affordability and advice process from an advisor who understands clients that are employed by the CIS scheme.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.