Construction Industry Scheme (CIS) mortgages

We specialise in mortgage advice for subcontractors paid via the Construction Industry Scheme (CIS).

CIS workers face the same mortgage challenges as self-employed contractors and freelancers. For years, we’ve helped them get onto the property ladder; we can help you, too.

Our forte is helping the flexible labour workforce get mortgages using their gross income. That means fixed-term contractors, freelancers and subcontractors paid via the Construction Industry Scheme.

Successfully bridging that gap has seen our reputation blossom. Mortgage Quest is now one of the most recognisable mortgage companies for UK independents.

We assess your mortgage affordability on your gross earnings, not net profits after tax. Interested to see how much you can borrow based on your CIS day rate before tax? Call us now on 020 8421 7998 or submit your confidential enquiry here.

What is the Construction Industry Scheme?

Do you complete a self-assessed HMRC tax return and pay 20% tax at source through a construction firm? If ‘yes’, then you are part of the CIS.

HMRC last revamped the CIS in 2018. The changes allow contractors* to deduct HMRC’s dues from a subcontractor’s payments at source. Those deductions are advance payments towards the subcontractor’s tax and NICs contributions.

For further information on the CIS, check out this guide for contractors and subcontractors. This government overview contains details of and clarifies what the scheme covers. Please note, the information thereupon is correct as of January 2024.

*A contractor is a business or other concern that pays subcontractors for construction work. Under the scheme, there are 2 groups of contractors:

• mainstream contractors, or
• ‘deemed’ contractors

Why is it challenging for CIS workers to get a mortgage?

If you’ve approached High Street lenders, you’ll have figured one thing out by now. Few lenders and building societies welcome CIS workers with open arms.

Most in-branch High Street mortgage advisors have difficulty understanding your payment structure. That’s because they have an inflexible view of mortgage lending criteria; all they know is:

• Their own system,
• The fixed elements to include in their calculation, and
• What those two things tell them to look for in an applicant

Anything beyond that remit—and your payment structure is way beyond it—you can forget it.

This often means CIS workers get turned down for mortgages going the traditional route. It’s not because they can’t afford it; far from it. It’s how in-branch staff interpret their income that remains a constant barrier.

CIS workers’ payslips and accounts are geared for tax planning. The net result is that their “salary” appears low compared to their top-line income.

There’s nothing illegal about how their tax is paid; it’s all above board. The scheme just enables both contract firms and subcontractors to maximise their take-home pay.

For advisors who don’t understand tax planning, it all seems unlikely or suspicious. All they see is a CIS worker’s salary and that it isn’t enough to afford the mortgage they’re asking for.

That’s why the High Street is such a no-go zone for genuine CIS workers looking for a mortgage.

What are the benefits of a CIS Mortgage?

CIS mortgage underwriting is fast, straightforward and based on common sense.

Underwriters won’t assess you on net profits. You’re not going to need 2-3 years of accounts.

Like contractor mortgages, underwriters assess CIS workers on their real income: their contract rate. That way, you can use your gross earnings to buy a home.

How do I Qualify for a CIS Mortgage?

The good news is that you don’t have to bust a gut to qualify. You start with your gross income; after that, all we need from you are:

• 3-6 months CIS payslips
• Your scheme registration details, including confirmation that your tax is deducted at 20%
• A deposit ready of at least 5%

What’s the ideal size deposit I need for a CIS Mortgage?

Past the underwriting stage, a CIS mortgage works like any other. The larger the deposit you put down, the more competitive the interest rate you get.

We’d recommend that you find at least 10% to put down. That’s when competitive interest rates start to kick in. Some lenders will offer 5% deposit mortgages, but they will insist on a perfect credit score.

How much can I borrow with a CIS mortgage?

Working out a CIS worker’s mortgage affordability is a straightforward calculation. We call the method we use to work out gross annual salary for comparison ‘annualisation’.

Most lenders will offer anywhere between 4.5 and 5.5 times your average annual income. This can vary, depending on the lender and your credit score.

We offer an example here, but do use our CIS mortgage calculator if you want to work it out yourself.

How to work out what you might borrow for a CIS mortgage

For example, let’s say you make £200 a day, work 5 days a week and for 46 weeks a year. Extended, this income gives you the potential to borrow £230,000 (with a CIS-friendly lender).

Yep, as much as that. Here’s how we work it out.

Take the £200/day rate × 5 (days worked per week) to get your weekly wage. In this case, 5 × £200 = £1,000 per week.

Then multiply that × 46, the weeks you work per year, to establish a ‘gross salary’. In figures, that’s £1,000 × 46 = £46,000.

Finally, multiply that £46,000 × 5.0, the bank’s affordability vector, and that gives you £230,000!

Can I get a CIS mortgage with bad credit?

We’ve made arrangements with specialist lenders for CIS workers with poor credit. They will consider you for a genuine CIS mortgage, but the rate may be higher than for those with good credit.

If you have questions and want to speak to an advisor, call Mortgage Quest today on 020 421 7998 or enquire now.