Joint Mortgage when One Applicant is Self Employed
Skipton CIS Mortgage – How Does It Work?
What is a CIS mortgage for Contractors?
For construction Contractors, it can often be more difficult to get a mortgage than for people with standard employed roles.
Because you’re Self-Employed, your income is more variable. A mortgage lender considers this a more risky position when it comes down to paying back the loan each month. So they often have stricter criteria for Self -Employed applicants and will offer less competitive rates.
There are thousands of subcontractors working in the construction industry, most of whom have a very stable workload and can manage a mortgage with ease. Fortunately, mortgage lenders are now beginning to realise this and are becoming more welcoming to contractors in the sector.
Certain mortgage companies now offer mortgage deals to subcontractors who are part of the Construction Industry Scheme (CIS). One of the major benefits of a Construction Industry Scheme mortgage is that you are often able to base your mortgage application on the gross income figure on your CIS payslip.
Using this total, before the tax is deducted, will give you better mortgage rates than the traditional self-employed mortgage route.
What is the Construction Industry Scheme?
The government created the Construction Industry Scheme in the 1970s as a way to protect construction workers and improve tax collection in the sector. Any contractor that employs subcontractors has to register with the scheme, and it means that tax is automatically deducted from the subcontractor’s pay.
The scheme helps subcontractors manage their income tax better by spreading it across the year, rather than paying a substantial tax return.
Subcontractors don’t have to register for the scheme, but joining it means tax is deducted at 20% on your earnings. Non-registered subcontractors are taxed at 30%.
What’s good about a Skipton Building Society CIS mortgage?
Skipton Building Society are one of the few high street building societies offering mortgages to CIS workers.
If you have previously sought a mortgage as a sole trader or limited company before, you’ll remember how complex the application can be. You will need to have submitted your business accounts and tax forms stating your annual income. With under three years’ accounts, it can be very difficult to be approved at all. Unless you had a large deposit, you’ll probably have been offered higher rates too.
With Skipton, you could end up with a better deal and a good chance of being approved. As always, whether you are accepted and the specifics of the mortgage deal you are offered will depend on your individual circumstances.
How do I qualify for a Skipton CIS mortgage?
Some lenders consider Contractors differently from other Self-Employed workers and will seek evidence of a current contract and the related income to assess suitability. Skipton is one of them – yet interestingly it views CIS subcontractors as Self-Employed rather than Contractors.
In order to be considered for a Skipton CIS Mortgage, then, the following criteria apply:
- Skipton calculates mortgage borrowing from gross CIS income.
- A 2-year record of CIS income is required and it needs to be confirmed by an accountant.
- Skipton are relaxed if you have had multiple CIS job in the last 2 years.
Subject to certain requirements, Skipton will give you an Agreement in Principle in advance of the full mortgage application. This is useful when you wish to make an offer on a property – it will encourage the vendor to accept it.
As with any mortgage or loan, Skipton will check your credit record. It is always a good idea to explore your score via Experian or another credit agency.
Can I get a CIS Mortgage with bad credit?
If you have run into financial problems in the past this will show up on your credit record.
Generally, bad credit will make it more difficult to find a good mortgage deal, but it does depend on the severity of the debt problem. Missing a credit card payment is much less severe than being declared bankrupt and a small satisfied blip on your credit report for less than £300 won’t affect your application with Skipton.
Depending on the situation, there may be ways of finding a mortgage deal. It’s worth seeking advice from a mortgage advisor in this situation.
How can CIS Mortgage advice help?
CIS Mortgage Advice specialises in helping construction sector Contractors to buy a home. As trusted advisors, we work with you to explore your individual circumstances and provide expert mortgage advice.
We will do all the mortgage calculations and comparisons and talk you through the costs of different deposits and mortgages and the most appropriate options for you. Whether you’ve been contracting for 12 months or 12 years, we’ll work on your behalf to explore the mortgage market.
Our registered office is fully authorised and regulated by the Financial Conduct Authority.