Construction Industry Scheme mortgages

What is the Construction Industry Scheme (CIS)?

The CIS allows registered contractors to deduct money from the payments they make to subcontractors. This money goes to HMRC. It is added to the income tax and National Insurance that the subcontractor must pay after submitting accounts.

Subcontractors do not have to register for CIS, but if they don’t, deductions are made at a higher rate. The Government’s CIS guide for contractors and subcontractors has more details.

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Author: Carl Shave - CEO and co-founder
Last updated: 26 May 2024

What is a Construction Industry Scheme mortgage?

A CIS mortgage is a term you might hear when a contractor or subcontractor is applying for a mortgage.

A mortgage lender will need to know that you are enrolled in CIS if you trade as a contractor. This is because it is relevant when it comes to assessing your income.

Not all lenders offer CIS mortgages and those that do may have different lending criteria. These mortgages allow subcontractors to prove income using the gross amount shown on the payslips they receive from contractors, instead of having to provide business accounts or a SA302 which shows the year-end tax calculation from a Self-Assessment tax return. This can be helpful to applicants with less than two years’ worth of accounts to show.

CIS lenders generally assess applicants on a case-by-case basis. To qualify you can expect to be asked to provide your CIS payslips for at least the last 3 months, sometimes 6. They will be used to calculate an average monthly income, from which an annual income figure will be worked out. You may also need to provide bank account statements for the same period.

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How do I qualify for a CIS mortgage?

Typically, to qualify for a CIS mortgage, you need the following:

  • 6 months CIS payslips
  • Tax on the scheme must be deducted at 20%
  • Minimum of 5% deposit
  • Be between the ages of 18-75

Provided that a subcontractor is registered for the CIS, lenders will generally accept payslips as proof of income.

If a subcontractor is not registered, they may have to provide at least one year’s accounts or an SA302. You will need to expect the declared figure to be used in the mortgage calculation.

What interest rates should I expect on a CIS mortgage?

CIS mortgage rates don’t typically differ from those of a standard residential mortgage. Instead, other influencing factors could determine the rates you are offered. These factors include:

  • The loan-to-value (LTV) ratio. Typically, the less you need to borrow, the lower LTV and the lower the interest rate.
  • Your credit history. The better your credit history, the better chance you have of being offered a competitive rate.
  • Affordability. The more financially comfortable a lender sees you can influence the rates offered.

The more you can satisfy each factor positively, the increased chances you will have of being offered lower rates.

What CIS mortgage lenders are available?

Some lenders do not offer mortgages for CIS workers, making it harder to get a mortgage. This is because of the perceived risk of unstable income.

However, don’t let this deter you – there are also plenty that do. Some of the lenders are specialist and designed to help CIS workers. On the other hand, there are also mainstream lenders available. Some of the lenders that we commonly deal with for CIS mortgages are NatWest and Halifax.

It’s worth seeking advice from one of our experienced advisers. They will be able to guide you through the whole application process, improving your chances of success by pairing you with the right construction industry scheme mortgage lender.

It’s ideal to have 10% of the property value for a deposit. Although, in some cases, it can be possible to only put down 5%.

As with any borrower, the greater the sized deposit the greater potential to access better rates. Therefore, you may be better off saving up for a larger deposit to save you money in the long run.

As with a standard mortgage, this will heavily depend on your income. During their affordability assessments, lenders will consider your last 3 to 6 months of payslips. This will then allow them to determine your yearly income.

Typically, a lender will allow you to borrow around 4 to 5 times your annual income. However, in certain cases, you may be able to borrow more. It’s always best to consult with a broker to accurately understand your borrowing capabilities.

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CIS Mortgage FAQs

As CIS worker mortgages are already a niche market, it can be very difficult to obtain one with bad credit. Although, it isn’t impossible to find a lender that will accept your application.

By using a specialist broker to seek expert CIS mortgage advice you can increase your chances. Not only do brokers have plenty of experience but they also have access to specialist lenders. These lenders aren’t always available to the public and can only be accessed through a broker or intermediary.

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