The mortgage options for construction subcontractors have increased by a third over the past year, mortgage brokers specialising in this field have said.
One construction-focused mortgage broker said: “There has been a 34% increase during the past year of lenders adapting their lending policy to suit CIS subcontractors.”
Another said: “The secret now seems to be out, with a plethora of lenders relaxing their criteria in the past six months for construction workers and no longer insisting on tax calculations and tax year overviews.”
The views of eight brokers are below.
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David Sharpstone, director at CIS Mortgage Advice:
“There’s been a 34% increase during the past year of lenders adapting their lending policy to suit CIS subcontractors.
“This is really positive news for anyone working in construction and looking to get on the property ladder.
“CIS workers are the best type of self-employed when it comes to obtaining a mortgage.
“This is because ‘Subby’-friendly lenders treat them almost as if they are employed. This means that, for these lucky workers, mortgage affordability is calculated form their gross CIS payslip income rather than the profit showing on their tax calculations.
“The difference in lending can be huge. For a groundworker, I’m currently helping, Skipton would lend £220,000 when using the tax calculations, but £350,000 when using the gross income on the past three months of CIS payslips.
“For Subbys, this makes the difference between homeownership and continuing to rent.”
Mark Jones, director at Jones and Young Mortgage Brokers:
“Sub-contractors being paid via the CIS Scheme get treated like they are employees with some lenders.
“It’s the best kept secret of the mortgage market. Sub-contractors and contractors effectively get the best of both worlds.
“They can use their gross pay and, with Halifax, they only need to prove three months’ income using their CIS slips.
“The major benefits mean they don’t need to have been self-employed for a minimum of one year or show two or three years of accounts to get a mortgage.
“Since the main contractor deducts 20% tax at the source, select lenders such as Halifax and NatWest treat you like an employee and allow you to use your CIS statements like payslips.
“As the lender doesn’t ask for the company accounts for income proof like true self-employed people, this means you can benefit from all the self-employed tax benefits with expenses, etc, and still be able to get a mortgage like an employed person.
“Lenders also allow them to use their gross day rate calculated over 46 or 48 weeks.”
Matthew Jackson, director at Mint FS:
“Subcontracting through the construction industry scheme used to be quite a niche area to advise upon with limited choice of lenders in this space.
“However with more and more focus on trades and more of the younger generation working via these schemes there has been a huge increase in lending to first-time buyers at higher loan to values.
“Historically, these cases always found their way to Halifax who would treat these clients as employed and work off of payslips.
“But the secret now seems to be out, with a plethora of lenders relaxing their criteria in the past six months for construction workers and no longer insisting on tax calculations and tax year overviews.”
Michelle Lawson, director at Lawson Financial:
“Different lenders have different policies so it is important for borrowers to not make assumptions.
“They are getting more flexible and adaptive to different work styles rather than having a more simplistic binary view.
“Any form of contractor should speak to a broker as we have a library of resources and experience as to which lenders suit them best.
“This isn’t always high street lenders and can often be regional building societies.”
Elliott Culley, director at Switch Mortgage Finance:
“If paid through an umbrella company, mortgage lenders who take payslips rather than tax calculations are the go-to in the construction subcontractor industry space.
“Most subcontractors increase their earnings as they become more experienced, so a lender that uses payslips will be able to provide a higher loan amount than lenders that treat subcontractors as self-employed.
“This is because the lender can use their current income rather than their average earnings over the past two to three years.
“This means there can be massive differences in borrowing capability depending on the lender in question.”
Rhys Schofield, brand director at Peak Mortgages and Protection:
“If you’re a subby working through C.I.S. you may well find you have a surprising amount of options at mortgage time using your statements more or less like a payslip as proof of income.
“Of the high street lenders, Halifax seemed to have led the way historically on this and had some competitive rates over the last few months but it’s always a good idea to speak to a broker to check you fit a lender’s specific criteria and are getting the best deal for your specific circumstances.”
Akhil Mair, director at Our Mortgage Broker:
“These are exciting times for construction subcontractors and CIS workers.
“It’s great to see lenders recognising the unique financial circumstances of these hardworking individuals. With more lenders considering self-assessment tax returns and employment history for affordability assessments, mortgage options have improved significantly in the past year.
“As for the most subcontractor-friendly lenders, there’s a growing list making strides in this space, offering tailored solutions to meet their needs.
“And the role of a broker? Absolutely crucial. Navigating the complexities of mortgage options can be daunting, but with a knowledgeable broker by their side, subcontractors can secure the best deals and smooth out the process.”
Richard Thompson, director at Abbeydale Mortgages:
“Construction subcontractor mortgages can offer significant advantages for people within the construction industry scheme, particularly with lenders who categorise them as employed rather than self-employed.
“This distinction can greatly enhance affordability, as lenders typically accept the contractor’s payslips provided tax is deducted.
“In many cases, lenders classifying contractors as employed can result in substantially higher borrowing levels for customers.
“Notably, lenders such as Halifax, Natwest, Skipton, Gen H, Saffron and Kensington are among those that may consider contractors as employed, opening up avenues for accessible mortgage options.”
