CIS Joint Mortgage
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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Podcast approved by The Openwork Partnership on 21/10/2024.
CIS Joint Mortgage (Part 1)
David Sharpstone explains how a joint mortgage works for CIS workers. Episode one of two, recorded in September 2024.
How does being a member of the CIS scheme affect your eligibility for a joint mortgage?
If you’re working in the construction industry scheme and you’re paid through CIS, you have the ability to use your gross income instead of your self-employed profits – which means you could borrow more.
To use that income as it appears on your pay slips, you need to use a ‘subby friendly lender’ – that’s not a real thing, it’s just a phrase I’ve made up. But these are lenders that understand CIS pay and are happy to use your gross income.
You might want to apply with somebody else, as a joint mortgage. If the other person is employed, they could probably go to any mortgage lender, but when you’re a CIS worker we are going to be restricted to those subby friendly lenders. There are between 10 and 15 lenders we use regularly for that.
But just because we’re slightly restricted, we don’t have to use specialist lenders. A lot of the banks I use for CIS are high street brands. Sometimes I’m doing the research and they might happen to have the right rate available that particular day. So there’s no real downside there.
What documentation is typically required for CIS workers when applying for a joint mortgage?
If you’re paid through the CIS scheme, you would need to provide anywhere between three months’ and 12 months’ pay slips. The number depends on the lender. When I do my initial assessment, I always ask for a year’s pay slips so we don’t miss out on any lenders.
So we start with that proof of income. Then we need corresponding bank statements for that period, just to show the money has been paid in – we normally ask for three months.
Then you need to prove your deposit savings over a three month period. If money is a gift, you would have to provide a gifted deposit letter and evidence of the gift as funds. You also need to prove you are who you say you are, with a government-issued ID.
If you’re a foreign national living in the UK, and you’ve got settled or pre-settled status, you would need to provide a share code for that to prove your right to live and reside in the UK.
Next is address identification, normally with a recent utility bill, bank statement or council tax bill.
It’s all very similar for the other joint borrower. If they’re not paid through CIS, they need to prove their income, assuming they’re working.
If they’re employed, it’s normally the last three months pay slips and a P60. If they’re self-employed, we need the last two years’ SA302s and corresponding tax year overviews. Everything else is going to be the same.
Are there any specific requirements or restrictions for CIS workers who are considering a joint mortgage?
If we’re looking to use the gross CIS income instead of your self-employed tax returns, we’re going to be restricted to certain mortgage lenders. But other than that, there are no restrictions.
I’m CIS registered, how can I improve my chances of being approved for a joint mortgage?
This is all about getting your ducks in a row. Get a copy of your credit file – One out there is Check My File because it shows Experian, Equifax and TransUnion. Some lenders use one or a combination of those three credit reference agencies to check your credit.
Get that report, have a look through and make sure that your address history is accurate. There’s nothing worse than having your bank account still registered to Mum and Dad’s address and you haven’t lived there for 15 years. So get that all up to date.
Make sure you’re registered to vote on the electoral roll. It’s not to be confused with registering for council tax – that’s different. You have to contact the council to get on the electoral roll. Do that early, because sometimes it could take a couple of months to show up on your credit report.
Also, just check through your credit history. Every now and then I see genuine errors. I’ve known people who have the same first initial and surname as somebody else in the same house, and just by accident you end up with elements of their credit history on your report. If that’s bad, it could affect your mortgage.
If that happens, you could do something called a financial disassociation. You have to prove it’s an error, which is quite easy to do.
Sometimes things come up that might be unfair. It could be a financial agreement where there’s a black mark against your name – but the issue is their fault. You could have that corrected if you could prove it.
In an ideal world, you want your credit report to be looking as good as it possibly could. The credit report should look as good as you did on your wedding day.
Those steps apply for both people, not just the subcontractor – whoever’s going on the mortgage.
What are some other ways to prepare for a CIS Joint Mortgage?
Make sure your CIS payslips are accurate. Quite often I get CIS payslips that are handwritten – that’s no good. Similarly, they might be in a format that is going to make it difficult to share with your mortgage lender.
Make sure that the amount on your pay slip matches up with what’s gone into your bank account. If you don’t get CIS pay slips, you should, so speak to your boss. Tell them you’re going to apply for a mortgage and you’re going to need them. Any construction firm that signs up to the CIS scheme is required to provide pay slips.
If it’s a family business or you’ve got a personal relationship with the person you’re working for, which is quite common in the construction industry, speak to the company accountant. They could help you with confirmation of how long I’ve been working there, the job you do and how much you’ve been paid over the last year.
Make sure that you have photo ID. It’s rare for somebody to have no passport or no driving licence, but without those, it’s difficult to provide photo ID. I can’t think of anything else other than a shotgun licence that’s government issued with your photograph on it.
If you’re getting a gift from anybody, make sure that the money is in your account at the point of mortgage application. Those are really the main things.
Can applicants who are CIS workers include their spouse or partner in a joint mortgage application?
Yes, you could include your spouse or partner. Some lenders insist on it – if you’re married, they expect you to include your spouse on the mortgage.
Sometimes that could cause an issue, because if your spouse has bad credit, it could actually prevent you from getting the mortgage, or going to the lender with the right rates. If they don’t work, having them on the mortgage application could sometimes pull down the affordability – but you may have no choice if they’re your spouse and that’s the lender’s requirement.
Perhaps you have a partner that you’ve lived with for a long time. You could have them on the mortgage application with you and they could be a joint owner of the property.
There’s no legal requirement to put even a long term partner on a mortgage application, though. The only time that mortgage lenders might insist on it is if the partner is contributing a lot towards the deposit.
But lenders also understand that you could have a gifted deposit from a partner towards a property. They’re going to live in the property and just not be named on the mortgage.
It’s also important to tell the truth if you’re supporting another adult who’s dependent on your income. They might not be on the mortgage, but they are relying on your income to be housed, fed and watered.
Are there any additional considerations for CIS scheme members applying for a joint mortgage, compared to employed individuals?
If you’re paid through the construction industry scheme and applying for a joint mortgage, compared to employed individuals there are a couple of things to mention.
Someone who is employed, unless it’s on a zero hour contract, is going to get the same salary every month. A mortgage lender would look at that basic salary, and any regular overtime, commission or enhancements would be averaged over a three month period.
However, if you’re paid through CIS, your last three months might not be that great. Perhaps you’re applying for a mortgage just after Christmas and you didn’t work for three weeks in December. Or, if it’s the summer holidays and you’ve just had a month in Ibiza, your last three month average is going to look a bit poor.
So it’s important to consider what your last few months look like. That’s why I always ask for the last 12 months payslips if available. It might mean there’s no point in going to a lender that’s going to look at the last three months right now because it’s pretty poor.
But if we look at your last 12 months of income, it’s going to iron out those creases. That’s probably the biggest consideration compared to someone employed on a regular salary.
What are the advantages and disadvantages of applying for a joint mortgage as a CIS worker?
The main advantage of applying for a joint mortgage as a CIS worker is that you could add on an extra person. In fact, some mortgage lenders allow you to add on three extra people and have four incomes on the application. You could add a friend, parents or relatives, and that would boost the amount you could borrow.
Of course, the amount you could borrow has to be affordable. It’s a mortgage broker’s job to assess that affordability. We look at your income and outgoings to make sure you could afford it now and in the long term.
In terms of disadvantages, if the other borrower has bad credit, it’s going to affect the rate you could go for and the lender we could approach. If that other person has a lot of debt, high monthly outgoings or financial committed liabilities, that’s also going to impact how much you could borrow.
If you’re a First Time Buyer and you’re adding on somebody who has owned property before, you’re not going to benefit from First Time Buyer stamp duty relief. Also, you won’t get the potential benefits of a First Time Buyer mortgage – although these don’t normally mean you get a lower interest rate.
You might get a few hundred pounds of cashback from a lender, though. I’ve seen First Time Buyer incentives of £250 to £1,000 cashback. If your joint borrower isn’t a First Time Buyer, you can’t apply for that deal.
How can CIS workers navigate potential challenges or obstacles when applying for a joint mortgage?
The first challenge I find is making sure that the person that you want to add to the mortgage has the ability to provide all the information we need. They also need the motivation.
Someone might ask if they could add their dad onto the mortgage – but if they’re not forthcoming with paperwork and their credit details, and they’re not available to receive the advice because it’s a joint mortgage, that’s definitely a challenge.
If you’re adding somebody onto the mortgage with you, make sure they will do everything possible to help you, in terms of being available and providing information.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Approved by The Openwork Partnership on 21/10/2024.
Speak To An Expert
Podcast approved by The Openwork Partnership on 21/10/2024
CIS Joint Mortgage (Part 2)
We continue the conversation on joint mortgages for CIS workers with David Sharpstone. Episode two of two, recorded in September 2024.
What factors do lenders take into account when assessing the affordability of a joint mortgage for a CIS worker?
For the CIS worker, they’re going to look at somewhere between the last three and 12 months’ payslips. Lenders take the income on those payslips before tax and before expenses.
When you’re looking at your CIS payslips, check the amount ‘liable for deductions’. If you’re paid for expenses, that can’t be taken as income. So the figure that a mortgage lender will use to assess affordability is the amount liable for deduction – that’s for your labour, not expenses.
Then, for the other person on the mortgage application, if they’re employed lenders look at the last three months’ payslips and work out what the basic salary is. Any overtime, bonuses or enhancements are averaged and annualised.
With a bonus, it depends on how often it is. If it’s annual, they might ask to see the pay slip it was paid on and a copy of the P60. If it’s bi-annual, you’ll need two payslips per year to show those bonuses coming in. With a monthly bonus, you normally need a P60 plus the last three months’ payslips. The lender will average and annualise that for their affordability assessment.
The next thing lenders look at is the outgoings. They’re not interested in your gym membership or phone contract – it’s your financial commitments, like loans, credit cards, PayPal and Klarna agreements, store cards, car finance and finance agreements. Normally insurance isn’t included, because lenders factor that into the background.
Are there any specific types of joint mortgage products designed for CIS scheme members?
No. It would be just a standard mortgage product that is available to the employed, self-employed, subcontractors etc. There’s nothing special for a joint application.
Can CIS workers benefit from any government schemes or initiatives when applying for a joint mortgage?
As I mentioned in the last podcast, there are certain ‘subby friendly’ lenders who understand CIS pay, and use your gross CIS income to work out affordability.
As long as those lenders are also on board with government schemes, we could use that in a joint application. It might be the shared ownership scheme, or a shared equity scheme like Help to Buy – although at the time of recording this in September 2024, Help to Buy is not available.
Over the last 20 years there’s often been a shared equity scheme, and as long as the lender offers some products for that, we could get involved.
Another government scheme is Right to Buy. You could be a CIS worker buying in joint names with someone to purchase the council property that you’re currently renting. With Right to Buy, that may be offered to you at a discount. Most mortgage lenders have options for you to do that.
Right to Vacate is similar to Right to Buy and we see that in some areas of London – especially around Enfield. Here, you’re given some money from the local authority to free up a property and make it available for somebody else. That’s also available on a joint CIS mortgage.
What do CIS workers need to know about the income assessment process for a joint mortgage application?
Sometimes I’ll be having a general conversation with a client, and I want to find out whether they are being realistic about what they need to borrow and what they want to buy.
I’ll always ask how much you’re earning per hour or per day, and work that out per year. Then I add on the income for the joint applicant. Typically, I’ll be cautious and multiply that total by 4.5 – that’s what most mortgage lenders would give you as long as you don’t have lots of financial commitments.
Some lenders will go up to 5.5 times the income. Also, if you’re hitting certain levels of income, which differs by lender but might be £50,000 or £75,000 total for the application, you could borrow at higher income multiples.
The reality is it’s an absolute minefield. Unless you’re speaking to a mortgage broker that specialises in these things, you’re not going to know all of the options out there.
How does employment history for CIS workers impact the likelihood of being approved for a joint mortgage?
For the joint person coming on the mortgage, if they’re employed, the mortgage lender would expect a minimum of six months in employment. They don’t want them to have been unemployed for most of their life and suddenly have an income three months before they want to apply for a mortgage.
If they’re self-employed, the minimum is one year. There are CIS-friendly lenders that will accept the joint borrower having one year in self-employment or as a company director. Two years is preferred, but it could be done with one.
The CIS subcontractor really needs to have been working in the industry for a minimum of a year, and some lenders out there require two years.
We can’t have somebody who was an Uber driver a few months ago suddenly applying for a mortgage with three months’ CIS payslips. Without at least a year’s history, that’s not adequate income for a mortgage application.
Are there any CIS friendly lenders or mortgage brokers for joint mortgage applications?
Yes, every CIS friendly lender we use would allow a joint borrower – at least one person, but sometimes up to three or even four. The third or fourth person wouldn’t even need to live in the property with you. It could be mum and dad, relatives or even friends joining the application to give you an affordability boost.
Can CIS scheme members include income from multiple sources in a joint mortgage application?
Let’s consider, first of all, the person who is paid through CIS and has a separate income that is entirely unrelated.
I’ll give you an example. I helped somebody paid through CIS who was also a musician. They played in a band at weekends and received additional income from that.
We were able to demonstrate that income to the mortgage lender using an accountant’s reference. It was self-employed income earned over the last two years, separated out from the CIS income. That’s always the most difficult thing – separating that self-employed income from the CIS on paper.
So yes, we could use other incomes. That second income might be an employed income, in which case that’s quite easy. But mortgage lenders do look at the feasibility and hours worked. Working long hours in two jobs might be feasible when you’re in your 20s, but not so much in your 60s.
Other incomes could be benefit income, bursary income or maintenance income. They could all be bolted on as well.
The other person on the mortgage application, who’s not paid through CIS, may also have multiple sources of income. Where there are second jobs, mortgage lenders want to know if it’s in the same line of work and how long it’s been done for.
Again, a second job that started three months before a mortgage application is normally a red flag. Lenders like to see that’s been sustained for at least a year. Benefit or maintenance income could also be used to boost affordability.
Is there anything else we need to know about joint CIS mortgages?
It’s such a minefield out there, especially if you’re paid through CIS. Lenders want to know so much – how long you’ve been doing it for, what’s your day rate, are you paid as a sole trader or through a limited company? Are you employing anybody else?
Then, trying to find the right mortgage lender to match your scenario could also be complex. Some lenders will want three months’ pay slips, for example, and others want 12. You really need to speak to an expert mortgage broker to point you in the right direction and place you with the right lender.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Approved by The Openwork Partnership on 21/10/2024.
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