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Halifax is renowned as one of the UK’s leading CIS contractor mortgage providers. In this guide, we explain all you need to know about the Halifax CIS mortgage. At Strive, we work closely with CIS contractors across the country to secure the best deals available.
What is a CIS mortgage for contractors?
Mortgage lenders that treat CIS workers based on their gross annual income from their CIS slips, rather than their self-employed net profit earnings from their tax returns, can yield significantly better affordability results because expenses that applicants deduct on their tax returns are not factored into the equation. While CIS workers are self-employed and most lenders treat them as such, there are specialist lenders that consider them employed/contractors for mortgage purposes.
Are Halifax a Good Lender for CIS Contractors?
- Favourable Income Consideration: They don’t treat CIS workers as self-employed unless more favourable to do so. This means they can use gross annual income from CIS slips rather than net profit from self-employed earnings, while most other lenders will take net profit.
- Income Averaging Method: They use a 3-month average of CIS slips, which is good if income has been high recently but bad if there has been time off or fewer hours worked recently. This method is easier to impact than lenders that take a 12-month average.
- Minimum Employment History Requirement: The minimum employment history required is only 3 months, significantly lower than other lenders that may require 12 months or even 2 years if treating you as self-employed.
- Affordability Ratios: Halifax offers good affordability ratios, usually lending 4.5 to 5 times income, or up to 5.5 times for higher earners.
- Streamlined Underwriting Process: They have a streamlined and quick underwriting process.
- Competitive Rates: Halifax often offers good rates that are market-leading.
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Halifax CIS Mortgage Criteria
- Minimum CIS Scheme Duration: Applicants must be on the CIS scheme for a minimum of 3 months.
- Gross Income Averaging: Halifax calculates the average gross income from the last 3 months of CIS slips.
- 46-Week Income Averaging: Halifax uses a 46-week average to account for time off due to holidays or sickness. For example, if the applicant earned £1,000 per week over the last 3 months, Halifax multiplies this by 52 and then divides by 46 weeks, resulting in a £46,000 annual income.
- Single Company Income: Halifax only considers income from one company. If you subcontract for more than one company, they will treat you as self-employed and use net profit from your tax returns instead.
Halifax Subcontractor Mortgage Affordability
Halifax determines mortgage affordability for subcontractors by using a 3-month average of payslips and a 46-week average. For example, if you earn £900 a week, Halifax multiplies this by 46 to account for time off, resulting in an annual income of £41,400.
They typically lend 4.5 to 5 times your annual income plus the deposit. Therefore, with an income of £41,400, you might be eligible for a mortgage ranging from £186,300 to £207,000, plus your deposit.
Halifax CIS Mortgage Compared to Self-Employed Method
Subcontractors are considered self-employed by HMRC. They deduct allowable expenses from their gross income to determine a net profit each month. For example, a subcontractor may earn £40,000 per year but offset £10,000 for fuel, travel, equipment, etc. Most lenders would take the net profit after expenses, resulting in an income of £30,000, and then average this over 2 years.
CIS contractor mortgage providers, like Halifax, use the gross income instead. In this scenario, an extra £10,000 of income is considered. Assuming a 4.5 times income multiplier, this could increase borrowing capacity by £45,000.
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How Much Deposit is Needed for a Halifax CIS Mortgage?
For a Halifax CIS mortgage, it’s possible to secure a mortgage with as little as a 5% deposit. However, this is dependent on factors such as your credit score, the lender’s criteria, and your overall affordability.
Halifax CIS Mortgage Rates
Halifax CIS mortgage rates are the same as those offered to regular borrowers. They are often market-leading or certainly competitive in the market.
Who Are the Best CIS Mortgage Lenders?
The best CIS mortgage lender depends on individual circumstances, but some of the most popular options include Halifax, NatWest, and Skipton.
What Documents Are Needed for a CIS Mortgage?
To apply for a CIS mortgage, you will need to provide identification (ID), proof of address, 3 to 12 months of CIS slips, proof of deposit, and 3 months of bank statements.
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How Can Strive Help?
At Strive, we can assist you in person with your CIS mortgage application by guiding you through the entire process. We provide y advice, help gather and organize required documents, liaise with lenders on your behalf, and ensure that you meet all necessary criteria to improve your chances of approval. Our expertise can make the process smoother and more efficient.
Frequently asked questions
- Do I need to provide tax returns for a CIS mortgage? Not with CIS-specific lenders, but other lenders may require them.
- How long do I need to have been employed as a CIS worker to get a mortgage? This varies by lender, typically ranging from 3 to 24 months.
- Can I use CIS slips for a mortgage? Yes, you can use CIS slips, with lenders usually averaging 3 to 12 months’ worth of slips.
Can I get a mortgage as a subcontractor? Yes, subcontractor mortgages are offered by some lenders, including Halifax, NatWest, and Bank of Ireland.
Contact us today, and we’ll work hard on your behalf to find you a competitive mortgage.
For more information on mortgages for contractors, please contact a member of the Strive team, by emailing [email protected] or call us on 01273 002697.
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