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Mortgages for Construction Industry Scheme Workers

Understanding Construction Industry Scheme mortgages - what lenders will look for, and how to prove your average annual income.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2023-05-09
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Construction Workers Mortgage Options

Construction Industry Scheme (CIS) mortgages are ideal for people in the construction sector, who might find it challenging to secure a competitive mortgage for any number of reasons:

  • They have been trading for less than three years, and therefore don't have the minimum number of years accounts required by most mainstream lenders
  • The accounting process means they write off tax-deductible expenses and declare a lower net profit than their actual earnings, which reduces the amount they can borrow.

CIS mortgage lenders understand this income structure and use the gross income as shown on your payslips to calculate your maximum borrowing limit, rather than relying on business accounts or self-assessment tax returns.

The business finance broker team has created this guide to explain how to find a Construction Industry Scheme mortgage, how they work, and how to get the best rates.

For professional support with negotiating the best CIS mortgage terms, contact us on 0330 304 3040 or send us a message at [email protected].

How Does Getting a Mortgage When Self-Employed Work For Construction Industry Scheme Applicants

A CIS mortgage isn't, in fact, a different product but is the term used for a standard mortgage that is adapted to the income structure of an applicant who works as a contractor or subcontractor and is enrolled in the CIS scheme..

The Construction Industry Scheme means that a proportion of your salary is deducted from your income by your contractor and paid to HMRC as an instalment against tax and National Insurance contributions payable..

Lenders must know that you are enrolled in the CIS scheme, which will impact the assessment process when analysing your income.

AboutAbout your mortgage
Single or joint mortgage?
What’s your yearly income?

Error: Yearly income income must be between £1 and £10,000,000.

Do you receive a regular bonus?

Error: Regular bonus must be between £1 and £10,000,000.

about your mortgage

Based on your yearly income,
you may be able to borrow

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£0

Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.

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£0

Depending on your personal circumstances, some lenders may let you borrow 5 times your salary.

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£0

Lenders usually cap the amount they lend at 5.5 times your salary, so it’s unlikely you’ll be able to borrow more than this.

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Can any CIS worker qualify for this sort of mortgage?

To apply for a CIS mortgage, you will need to have:

  • CIS payslips for the last six months.
  • Demonstrate that tax has been deducted by your contractor at the standard 20% rate.
  • A minimum 5% deposit to put down on the property.

How complicated are mortgages for contractors and subcontractors?

If you are looking for a mortgage from a mainstream lender, securing a competitive mortgage as a contractor can be tough.

However, working with a broker who is experienced in the sector makes the process much more manageable. Generally speaking, self-employed mortgages are more complicated as many sole traders will reduce their net profit by writing off tax-deductible expenses before submitting their self-assessment tax return.

The impact is that you correctly reduce your tax obligations, but in turn, your accounts and tax returns reflect a lower income than your actual wages and, therefore, can restrict the amount you can borrow.

Using a mortgage lender familiar with the CIS scheme enables you to use the gross income figures shown on your CIS payslips, hence needing six months worth of payslips to evidence your regular income.

Should your contractor deduct tax from your wages at a higher 30% rate, then you may also be asked to provide copies of your business accounts.

How Can a Self-Employed Mortgage Broker Help Me Get a Contractor Mortgage?

As self-employment becomes more popular, you can find contractor mortgages with many banks and building societies.

However, it is always worth consulting an experienced broker before making an application, as there may be much more favourable rates available from niche lenders who specialise in this sort of lending.

Particularly if you fall outside of the 'standard' eligibility criteria, a broker is almost sure to be able to find you a better deal - this could include:

Revolution Brokers have years of experience in negotiating terms on a wide range of self-employment mortgages and can present your borrowing requirements to any of thousands of lenders.

  • Having been trading for less than three years.
  • Having a complicated income structure.

What is my maximum borrowing limit on a Construction Industry Scheme mortgage?

Most lenders familiar with CIS income will use an income calculation to decide how much they can lend you.

The relevant figure is called the 'value of measured work' - so let's take the below as an illustration of a monthly payslip:

Value of measured work

£4,275

Less Retention

(£0)

Plus VAT

£0

Less Tax Deducted 20%

(£855)

Net Pay

£3,420

In this example, the value of measured work is £4,275 - the gross amount earned. Mortgage providers will add the value of measured work, usually over the last year, and then calculate the average to work out your annual income.

Most lenders can offer up to four times your annual earnings, although this depends on other circumstances. If you have other obligations such as debts, loans or mortgages, then the monthly repayments will be deducted from your income before making this calculation.

Say this CIS contractor earned the same amount every month, then their annual income would be £51,300, and most lenders would offer a mortgage up to a maximum of £205,200.

What is the Best Bank for Self-Employed Mortgage Applicants?

Not all banks will offer CIS mortgages, so applying straight to your usual banking provider isn't often the right solution.

The best lenders for CIS mortgages will regularly lend to self-employed people, and be familiar with the scheme and how that impacts the values shown on your payslips and self-assessment tax returns.

Usually, a CIS scheme mortgage will allow you to prove your income from your payslips (before deductions), which means you won't always be asked to provide SA302 forms or filed accounts as you might for another self-employed mortgage.

This system is also handy if you've been self-employed for less than two years and can therefore demonstrate a steady income even if you don't have sets of accounts going back further!

However, choosing the right lender depends heavily on how much you wish to borrow and aligning your circumstances with a CIS mortgage provider - hence the need for an independent broker.

How Can a Broker Help Me Find the Best Mortgage Lenders for Self-Employed CIS Workers?

There isn't a one-size-fits-all solution to the right self-employed CIS mortgage - as a whole-of-market broker, our job is to assess your borrowing requirements and provide tailored advice to ensure you apply to the best-suited provider.

Each mortgage assessment is bespoke, so it's essential to know how the lender calculates your average monthly income and what that means for the maximum mortgage value they will offer.

Therefore, Revolution Brokers run through an initial assessment, work out which lenders will offer you the most competitive rates, and help negotiate throughout the application process to ensure you're getting the best possible deal.

Getting a Mortgage When Self-Employed Through CIS With Adverse Credit

It can be more challenging to find a competitive mortgage if you have bad credit, but using an expert broker means you can access specialist bad credit lenders who will be happy to consider your application.

Provided you have no severe credit issues and your credit history is free of defaults or CCJs over the last two years, you can still negotiate favourable rates.

Professional Self-Employed Mortgage Broker Support

If you are a CIS contractor and have struggled to find a mortgage or don't know where to start in finding a lender who will accept CIS applications, give the Revolution Finance Brokers team a call!

Our team is highly experienced in contractor mortgages and can provide bespoke advice about who to apply to and what the most competitive mortgage is for you.

Call us on 0330 304 3040 or drop us a message at [email protected].

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

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