What is a CIS mortgage ? In today’s blog Will answers all the commonly asked questions and explains how you can use your CIS payslips to maximise your mortgage borrowing.
Firstly lets understand what CIS actually means. CIS stands for “construction industry scheme”. The scheme was launched in 1971 and was devised to allow government to manage tax evasion for all different types of trades in the construction industry. It meant that employers had an obligation to deduct 20% tax from all income at source for their “employees”. I use the term employees loosely because in theory most of these people would class themselves as self employed as although tax is taken from them there are no national insurance deductions and they have to do an annual tax return to confirm their earnings.
CIS Mortgages: A mortgage application under the CIS scheme will allow you to use your payslips which are sometimes known as CIS vouchers to calculate your income, most of the lenders that offer this type of mortgage will work of an average of the last 3 or 6 months gross income from your payslips to calculate your income, in effect you are treated like an employee!
How many CIS vouchers do I need ?
3-6 months with most banks that allow this type of mortgage (some may want 12 months)
Will you need to speak to my accountant ?
No in most situations your accountant will not need to do any work.
How long do I need to be working under the CIS scheme?
A minimum of 3 months but longer for some lenders.
Do I need to be working for just one company ?
No with many banks you can have done work for more than one company.
How do they calculate my income for a mortgage using the CIS scheme ?
This differs with each bank, a common way will be to take an average of 3 months (13 weeks) CIS payslips and times this by 46 or 48 weeks to get an annual income (they don’t usually x by 52 weeks to allow for holiday and sickness) .
Why use my CIS vouchers rather than my accounts ?
- You may not have a full 2 years accounts often required when you are applying for a mortgage
- Accounts sometimes show a lower income, your accountant could have made several deductions that mean your net profit shows a significantly lower income than we can prove using your payslips show.
- Using your CIS payslips often means you can borrow significantly more than using your accounts
- With some banks you may only need 3 months of CIS payslips if you have been in the same line of work before.
In summary if you are a CIS worker then speak to an expert that understands the scheme, they will talk you through the process, let you know what documents are needed and be able to tell you what can be borrowed.