Getting a Mortgage Through the Construction Industry Scheme
Do you work in the construction industry and want to know more about CIS mortgages? This guide will tell you everything you need to know.
Do you currently work through a Construction Industry Scheme (CIS)?
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Author: Pete Mugleston - Mortgage Expert, MD
Updated: December 15, 2021
If you’re a subcontractor working in the construction industry, getting the mortgage you need can be difficult, particularly if you don’t have enough evidence to back up your earnings.
This guide offers all the information you need on how you can improve the chances of your mortgage application being successful if you’re registered under the Construction Industry Scheme (CIS).
The following topics are covered below...
How does a CIS mortgage work?
So, when it comes to applying for a mortgage the majority of lenders will normally want to see 2-3 years certified business accounts or the equivalent SA302 statements from HMRC as proof of income.
If you’re finding it difficult to get approval for the mortgage you need, it’s likely down to one of two reasons:
- You have less than 2 years worth of certified accounts/ SA302s
- The net profit declared on your accounts/ SA302s isn’t enough evidence for the amount you need to borrow
This is where the construction industry scheme (CIS) can help. Under the CIS, a subcontractor receives a payslip voucher showing both their gross and net income (with 20% deducted at source).
So, rather than using accounts/SA302s as evidence of earnings, if you’re being paid through the CIS, some mortgage lenders will allow a subcontractor to use the gross income shown on your payslips when conducting their affordability checks.
How much you could borrow
Try our mortgage calculator for contractors below to get a rough idea of this.
Contractor Mortgage Affordability Calculator
Our contractor mortgage calculator will tell you how much you can borrow, whether you work in an employed or self-employed capacity. Select your trading style below, enter the relevant details about your income and our calculator will do the rest.
You could borrow up to
Most lenders would consider letting you borrow
This is based on a multiple of 3-4.5 times your income, a standard calculation used by the majority of UK mortgage lenders. You should speak to a mortgage broker for bespoke calculations if you have been contracting for less than 12 months, your contract is coming to an end, or there is uncertainty around your long-term employment.
This is based on a multiple of 3-4.5 times your income, a standard calculation used by the majority of UK mortgage lenders. You should speak to a broker for bespoke calculations if you’ve been self-employed for less than 2-3 years, have declining profits or fluctuating income.
Some lenders would consider letting you borrow
This is based on 5 times your income, a calculation only some lenders are willing to offer. You may struggle to find a lender who will offer this income multiple to an employed contractor without the help of a broker, and you should seek advice from one regardless if there is any uncertainty around your employment situation.
This is based on 5 times your income, a calculation only some lenders offer. You might need a broker to access this salary multiple and should take advice from one regardless if you’ve been self-employed for less than 2-3 years, have declining profits or fluctuating income.
A minority of lenders would consider letting you borrow
Only a small number of options are available for employed contractors who want to borrow based on this salary multiple. Few UK mortgage lenders offer mortgages based on x6 income under any circumstances, and you’ll almost certainly need the help of a specialist mortgage broker who knows this corner of the market inside out to access them.
Only a small number of options are available for self-employed contractors who want to borrow based on this salary multiple, as few mortgage providers are willing to offer 6 times salary deals. You’ll almost certainly need the help of a mortgage broker to borrow this amount.
Get Started with an expert broker to find out exactly how much you could borrow.
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What are the benefits of using the CIS payment method?
There’s three main benefits where using the CIS could help get you the mortgage you need:
1. Using gross income rather than net profits
Let’s say, for example, the payslip vouchers you’ve received under the CIS equate to an annual gross income of £50,000 and the lender you’ve applied to uses an income multiple of 4 x annual income as a guide for how much you can borrow. On this basis you could borrow up to £200,000.
On the other hand, if the declared net profits on your accounts or SA302 are only £35,000 (most accountants will try to legitimately keep their clients net profits low so they pay less in tax), then on this basis you would only be able to borrow £140,000.
As you can see, the payment methods used for CIS workers can make a big difference when assessing how much you can borrow for your mortgage.
2. Affordability assessment based on one year’s earnings
Most lenders who are happy to include the CIS when calculating affordability will usually want to see evidence of at least 3-6 months payslips and an employment record with your current contractor of twelve months.
This means the usual standard requirements for a self employed person, to provide 2-3 years certified accounts, doesn’t apply if you’re registered for the CIS and using your payslips as proof of income.
3. More lenders will consider your application
Being able to use the higher annual gross income figure makes your application more attractive to a wider range of mortgage lenders.
It also gives you a better chance of clearing the affordability checks and qualifying for the best interest rate offers.
Which lenders offer mortgages for CIS workers?
Not all mortgage lenders will accept payments made through the CIS as an alternative proof of income and those that do tend to assess applications on a case by case basis.
But the good news is that the majority of UK lenders will at least consider your application if you’re a CIS contract worker.
Among the minority who won’t, at the time of writing, are…
- Furness Building Society
- United Trust Bank
If you’re registered under the CIS, the smartest move you can make is to speak with a mortgage broker who has the knowledge and experience of dealing with applications of this nature.
Rather than trying to search for the best lender yourself, a mortgage broker will save you so much time by using their expertise to identify which lenders tend to look more favourably on CIS workers.
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Can you get a CIS mortgage if you’re paid on a day-rate basis?
Yes, it’s possible. There are quite a few cases of both contractors and subcontractors who will be paid on a daily rate due to the nature of their work and industry.
For the purposes of applying for a mortgage through the CIS, the most important thing is producing enough evidence of the payslips vouchers you’ve received so a mortgage lender can work out your average gross annual income.
Whatever day rate has been applied should be reflected on your CIS payslips.
How many payslips do you need to show as evidence of earnings?
Most lenders will want to see at least 3-6 months worth of payslips through the CIS and also continuous employment with the same contractor for the last twelve months.
They’ll also want to see bank statements for the same period and details of all your outgoings.
What if you’re not registered through the CIS?
As a subcontractor it isn’t mandatory to register through the CIS, however this means your contractor will deduct 30% from your gross income rather than 20%.
If you still want to apply for a mortgage, lenders will want to see your certified accounts and/or SA302 statements in the absence of any CIS payslips.
If you’re not yet registered but want to do it, you can do this through the HMRC website.
Get matched with a CIS mortgage expert
Trying to find lenders who are happy to consider mortgage applications from CIS workers can be quite time consuming if you’re doing it on your own. This is where we can help.
We understand everyone’s circumstances and requirements are different.
That’s why we’ll only match you with a broker once we understand what you’re looking for. The advisor we select will be fully briefed on your situation so they’ll be ready to help manage your application from start to finish.
Call 0808 189 0463 or make an enquiry and we can arrange a free, no obligation call with an expert mortgage broker who has experience in assisting CIS workers get the mortgage they need.
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About the author
Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!