Mortgages for CIS Workers
HMRC set up the Construction Industry Scheme (CIS) so contractors can make tax deductions at source from the payments they make to subcontractors. This deduction counts as an advance payment towards the amount of income, tax and National Insurance that the subcontractor will need to pay after filing end-of-year accounts. The contractor will usually provide payslips showing gross and net income.
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- Try our self-employed mortgage calculator
- Read our self-employed mortgage guide
- Construction Industry Scheme mortgage advice
- How much can I borrow for a CIS mortgage?
- How do I qualify for a CIS mortgage?
- What CIS mortgage rates to expect
- Finding the right CIS nortgage lender
- CIS mortgage advice
- What deposit is needed for a CIS mortgage?
- Can I get a CIS mortgage with bad credit?
It is not obligatory for subcontractors to register for CIS, but if they don’t, a contractor will have to make higher tax deductions. The government’s CIS guide has more detail on what is and is not covered by the scheme and will contain up-to-date rates. Please note that some of the information on this page may have been superseded by new information from HMRC since the time of writing. Please check with HMRC to confirm any unanswered questions about CIS.
Construction Industry Scheme mortgage advice
The application process for a CIS mortgage allows subcontractors to prove income using the gross amount shown on the payslips. This is instead of having to provide full accounts and/or their SA302 form showing the year-end tax calculation from a self-assessment tax return.
Applicants with less than two years’ worth of accounts available are able to benefit most from this. However, you need to bear in mind that not all lenders offer CIS mortgages and those that do will have varying criteria.
Mortgage lenders will generally assess applicants on a case-by-case basis rather than applying an all-encompassing set of rules. You will usually need to provide your CIS payslips for the last three months in order to qualify, but up to six months’ worth or more might be needed in some circumstances.
The mortgage lender will use them to work out your average monthly income, and thus your general annual figure on which to base their assessment. You might also need to produce your bank statements for the corresponding time period for further verification.
How much can I borrow for a CIS mortgage?
Mortgage offers are always made on the basis of your verifiable annual income. Lenders will check your recent payslips, usually from the past three to six months, before making an offer.
But you usually can borrow five times your annual income. Every lender will have their own criteria for assessing your annual income and mortgage affordability. Therefore, an experienced mortgage broker with an in-depth knowledge of the market will be able to guide you to the right lender.
It’s all about proof of income. Mortgage lenders will generally accept regular payslips as proof of income, provided a subcontractor is registered for CIS. If a subcontractor is not registered – meaning tax will be deducted by the main contractor at a higher rate – they should expect lenders to ask for at least one year’s accounts and/or an SA302 form, and for lenders to use the year-end figure declared on those documents in the mortgage calculation.
In the past, it has been the case when self-employed people apply for a mortgage that lenders will ask to see three years’ worth of accounts, but in more recent times many lenders now accept just the most recent twelve months. Subcontractors generally need to be able to show continuous employment for the last twelve months, with at least six months still remaining on their current contract, or be able to demonstrate at least two years’ continuous employment in the same type of role. This said, most lenders will accept that contractors are likely to have gaps in their employment, due to either taking a holiday or were simply between contracts.
With over a quarter of the UK workforce now on some kind of contracted employment, many of the mainstream lenders who have previously been quite stringent in their rules have now decided to become more flexible in how they offer mortgages and who to, recognising that failure to do so will mean giving up on a significant portion of the market. A specialist mortgage advisor will be able to tell you exactly which lenders are more amenable.
What CIS mortgage rates to expect
You might have found that many lenders will not offer mortgages to people paid via CIS. However, from our experience, we know of many specialist lenders who are comfortable to help CIS workers.
Interest rates and fees typically don’t differ because of the nature of your employment. Instead, they can vary according to other influencing factors. Some factors that may influence interest rates are:
- The Loan-to-value or LTV – the lower this is the lower the interest rate will typically be.
- Credit history – if you have had any credit issues this could impact the rates available to you.
- Affordability – all lenders differ in the way they assess your affordability. It may be that you have limitations in your choice for your required loan size. This could in turn influence the rates available to you.
It’s best to discuss your situation with a mortgage advisor to discover what rates may be offered to you.
Due to a perceived risk of unstable income, many lenders shy away from CIS mortgages, meaning that your options are limited when it comes to available lenders. However, there are many specialist construction industry scheme mortgage lenders emerging.
Some lenders that have a good track record of assisting CIS workers are:
- Halifax
- NatWest
Remember, just because these lenders are suitable for other people, it doesn’t mean they will be for you.
It could be tempting to try applying to a number of lenders for a mortgage until you find one that can help you out. However, please be aware that multiple applications may mean multiple credit checks, which could adversely affect your credit.
Our extensive knowledge of the mortgage market allows us to show you which lenders have products that will meet your needs. This helps to ensure that you get reasonable interest rates and terms, without the need for a number of individual enquiries.
CIS mortgage advice
Any CIS worker should be able to obtain a mortgage without too much difficulty. The markets are more flexible now than they were ten years ago, with multiple lenders available.
Our expert mortgage advisors are intimately familiar with the market, knowing lenders’ practices, criteria and products inside out. We have access to specialist lenders and exclusive rates that you will not find advertised on the high street.
As well as finding the right CIS worker mortgage, we’ll also help you with your application and advise you based on your individual circumstances. Just get in touch today to arrange a free initial consultation and a no-obligation quote.
You should ideally have at least 10%, but you may find some deals where 5% is possible, depending on the lender. A larger deposit will enable you to access more favourable interest rates.
Mortgages for CIS workers are already quite a niche market, and not all lenders will offer them. If you have a bad credit history then you might find that the options for lenders is further reduced, putting you in a challenging situation to find the mortgage you need.
However, our team at The Mortgage Centres are well-versed in which specialist lenders to talk to. We have access to those that could be able to offer mortgages to CIS workers with a bad credit history.
These lenders consider each application on a case-by-case basis, making them much more understanding towards people with bad credit.
Phil Scott
Director
About the author
Phil has worked in the financial services industry since 1992, having started with a large insurance company. He went self employed in 1996 as an Independent Financial Adviser before setting up his first company, Needham Market Home Financial in 1999.
After four years, he decided to concentrate solely on mortgages and related insurances, and The Mortgage Centres was born. Since then, Phil has been influential in the opening of several new offices as the business continues to grow.
Qualifications
Financial Planning Certificate: 1,2 & 3
Year Attained: 1992
Certificate in Mortgage Advice and Practice (CEMAP)
Year Attained: 2001
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