Construction Industry Scheme Mortgages (CIS)

Construction Industry Scheme Mortgages

For self-employed construction workers, getting a mortgage can feel more complicated than it needs to be. If you’re paid under the Construction Industry Scheme (CIS), you might worry that lenders will struggle to assess your income or treat you like a high-risk borrower. But with the right approach and the right mortgage product, you can get a competitive mortgage deal based on your actual earnings.

Thanks to CIS mortgages, specialist lenders now offer solutions specifically tailored to contractors and subcontractors working in the construction sector. These mortgage products take your unique income setup into account and allow you to borrow based on your gross income, not just your net profit.

Under the Construction Industry Scheme, contractors deduct money from subcontractors’ payments as tax and National Insurance contributions before passing it to HMRC. These deductions are considered advance payments towards the subcontractor’s annual tax and National Insurance liabilities, helping manage tax obligations and potentially influencing mortgage considerations.

What Is a CIS Mortgage?

A CIS mortgage is a type of mortgage designed for construction workers who are registered under the Construction Industry Scheme (CIS) with HMRC. Under CIS, contractors deduct tax at source from subcontractors’ pay and report it to HMRC. Although subcontractors are technically self-employed, their earnings are regular and traceable via CIS payslips. CIS payslips display both the gross amount and net income, which are key figures for mortgage applications.

Many traditional lenders evaluate self-employed mortgage applicants based on their net profit and require two or more years of trading history. Self employed applicants are often required to provide business accounts or self employed accounts, as well as a self assessment tax return, to prove income. This puts many CIS workers at a disadvantage.

A CIS mortgage offers an alternative way to assess affordability, often using gross income from recent CIS payslips rather than relying solely on tax returns or annual accounts. Lenders can use the gross income shown on CIS payslips to calculate gross annual income, which may be higher than the net income reported after income tax and expenses. This approach is particularly beneficial for those with low net profit, as it allows them to qualify for higher mortgage amounts based on gross income.

How Do CIS Mortgages Work?

Unlike standard self-employed mortgages, CIS mortgages allow lenders to assess your income using your recent CIS payslips. Most lenders will look at your average gross earnings over the last 3, 6, or even 12 months, and then use that figure to determine how much you can borrow.

Example:

If your CIS payslips show that you earned an average of £3,000 per month over the last six months, a lender may treat your annual income as £36,000 (£3,000 x 12). This can often result in a higher mortgage offer than if they assessed your income based on net profits shown in your tax returns.

This approach gives you a more accurate borrowing potential and reflects what you are actually earning, rather than what you report after expenses. Using gross income from CIS payslips is a key part of the mortgage calculation process for CIS workers, as it allows lenders to assess affordability and determine your maximum mortgage amount more accurately.

Construction Industry Scheme Benefits

The Construction Industry Scheme (CIS) brings a range of benefits for workers in the construction industry, especially when it comes to securing a mortgage. One of the standout advantages is that CIS workers can use their gross income, rather than just their net profit, when applying for a cis mortgage.

This means that mortgage lenders can assess your mortgage affordability based on the higher gross income figure, potentially allowing you to borrow more than you could with a standard self-employed mortgage.

The construction industry scheme CIS also provides a level of income stability that many lenders appreciate, which can lead to more favourable interest rates and better mortgage terms. Because your income is verified through the CIS scheme, the application process can be more straightforward, and lenders may be more confident in your ability to meet monthly payments.

Additionally, working with a cis mortgage expert or seeking specialist mortgage advice ensures you have guidance tailored to the unique aspects of the industry scheme, helping you navigate the process and maximise your borrowing potential. For many CIS workers, these benefits make the path to homeownership much more accessible.

What Do Lenders Look For in a CIS Mortgage Application?

Lenders that offer CIS mortgages will look for the following:

1. Length of Time Under CIS

Most lenders want to see at least 6 to 12 months of continuous work under the CIS scheme. The longer your work history, the better.

2. Consistent and Verifiable Income

You must be able to demonstrate stable earnings. Lenders will want to see regular income from CIS payslips and corresponding deposits into your bank account. If your income is considered unstable income, lenders may be more cautious, which can affect your eligibility for a mortgage.

3. Proof of Income

You’ll need to provide:

• Recent CIS payslips (usually the last 3–6 months)

• Corresponding bank statements

• Possibly your SA302s or tax year overviews

4. Credit History

Like any other mortgage applicant, your credit score matters. A strong credit file can boost your chances and unlock better rates. Some lenders will accept applicants with adverse credit, but rates may be higher.

Lenders will perform credit checks as part of the application process, and multiple applications can impact your credit score. They will also assess your credit commitments, such as existing loans or credit cards, to determine your ability to afford mortgage payments.

5. Deposit Amount

CIS mortgage products are available from 5% deposit upwards, but a higher deposit (10% or more) will give you access to more lenders and better deals.

Financing and Affordability for CIS Mortgages

When it comes to financing and affordability, CIS mortgages are designed to accommodate the unique income patterns of CIS workers. Most lenders offer cis mortgages with specific lending criteria, often requiring documentation such as recent CIS payslips and bank statements to verify your income.

The construction industry scheme CIS gives lenders a reliable framework to assess your average monthly income, which is crucial for determining how much you can borrow.

CIS mortgage specialists can help you identify the most suitable lender for your circumstances, taking into account your income, employment history, and any other financial commitments like credit cards or personal loans.

Even if you have bad credit, some lenders offer cis mortgages, though you may face stricter lending criteria or higher interest rates. By working with a specialist and providing clear evidence of your income through the industry scheme, you can improve your chances of securing a mortgage that fits your needs and budget.

Mortgage Rates and Terms for CIS Workers

Mortgage rates and terms for CIS workers can vary widely depending on the lender and your individual financial profile. Many cis mortgage lenders recognise the stability provided by the cis scheme and may offer more favourable interest rates and flexible terms compared to standard self-employed mortgages. However, your credit history, the size of your deposit, and the loan-to-value ratio will all influence the interest rates you’re offered.

CIS workers can benefit from consulting a mortgage broker or independent mortgage adviser, who can help you compare offers from different mortgage lenders and negotiate the best possible deal. Some lenders offer fixed-rate mortgages, providing predictable monthly payments, while others may offer variable-rate options that could change over time.

It’s important to review all your options and consider how different rates and terms will affect your long-term financial plans. With the right advice, you can find a cis mortgage that matches your needs and offers competitive interest rates.

Credit History and Mortgage Approval

Your credit history is a key factor in the mortgage approval process, and it can have a significant impact on the types of cis mortgages available to you. Mortgage lenders will review your credit report to assess your reliability as a borrower. If you’re a CIS worker with bad credit such as missed payments, defaults, or county court judgments (CCJs), you may face additional hurdles during your mortgage application.

However, specialist lenders are often more flexible and may still consider your application, even if your credit history isn’t perfect. These lenders might require a larger deposit or charge higher interest rates to offset the perceived risk.

Working with a cis mortgage expert can help you find the right lender and prepare your application, ensuring you provide all necessary documentation and explanations for any credit issues. By understanding the application process and seeking advice from professionals, CIS workers with complex credit histories can still achieve their homeownership goals.

Step-by-Step Guide to Getting a CIS Mortgage

1. Get Your Finances in Order

• Check your credit report

• Pay off debts where possible

• Save for a bigger deposit

2. Keep Accurate Records

Maintain a file with your CIS payslips, invoices, and bank statements to show income consistency. When preparing your documents, remember that some lenders may require a year end tax calculation, such as the SA302 form, or a tax year overview as part of their income verification process.

3. Speak to a Specialist Mortgage Broker

Many lenders who accept CIS income do not deal with the public directly. A broker who specialises in CIS mortgages can help match you to the right lender.

4. Avoid Unnecessary Expenses on Your Tax Return

Some self-employed workers write off as many expenses as possible to lower their tax bill. While this reduces tax, it also lowers your declared income, which can impact your borrowing if the lender uses your tax returns.

5. Get a Mortgage Agreement in Principle (AIP)

Before house hunting, get an AIP based on your CIS income. This shows sellers and agents you’re a serious buyer.

Pros and Cons of CIS Mortgages

Pros:

• Borrow based on gross income, increasing borrowing potential

• Suitable for those with less than two years of trading

• Faster assessment compared to traditional self-employed applications

• Accessible from just 5% deposit in some cases

Cons:

• Not all lenders accept CIS income

• May still require tax returns depending on the lender

• Some lenders may only be available through a mortgage broker

• Interest rates may be slightly higher depending on your profile

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Which Mortgage Lenders Accept CIS Income?

Several lenders offer mortgage products tailored to CIS workers, either directly or via brokers. Both specialist and mainstream lenders now offer CIS mortgage products, reflecting the growing acceptance of CIS income. These include:

In terms of features and qualification, a CIS mortgage is similar to a standard mortgage, so borrowers can expect access to comparable terms and conditions. CIS mortgage rates can vary between lenders, so it’s important to compare rates and terms to find the best deal.

Expert Tips for CIS Workers

• Use a whole-of-market mortgage broker: They have access to exclusive deals and lenders who understand CIS income. Seeking CIS mortgage advice from a mortgage adviser or mortgage advisor who is familiar with the Construction Industry Scheme can help you navigate complex lending criteria and improve your chances of approval.

• Keep detailed records: Consistency and traceability of your income are crucial.

• Limit gaps in employment: Lenders want to see stability.

• Prepare early: If you’re thinking of buying, start preparing 6–12 months in advance.

Getting a mortgage while working under the Construction Industry Scheme doesn’t have to be difficult. With CIS mortgages, specialist lenders offer a practical route to homeownership based on your actual earnings. By keeping accurate records, working with an experienced broker, and understanding what lenders are looking for, you can significantly improve your chances of approval.

Get help from an experienced mortgage broker.

You can speak to one of our specialist mortgage brokers who would be able to guide you through the process. They will advise if there is a lender available and the maximum loan amount based on your circumstances. We are a whole of market mortgage brokerage with access to all lenders. Call us on 01332 470400 or complete the form with your details for us to give you a call back.

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