Construction Industry Scheme (CIS) Mortgages

By Kristian Derrick

Last Reviewed: 5th October 2023

If you’re self-employed in the construction industry in the UK, you’re not alone.

According to Statista, in the second quarter of 2023, around 783,000 workers who are self-employed live in the UK’s construction industry.

Buying a house can be overwhelming, especially financially.

If you work in the construction industry, you may find yourself wondering if you’ll even qualify for a mortgage in the first place.

You may have heard the term “construction industry scheme” mortgage or CIS if you’re trying to get a mortgage and work in the construction industry.

While there is no official CIS product in the UK, mortgages are available for construction industry workers.

It’s sometimes called a CIS mortgage if an applicant applies for a mortgage using the CIS scheme.

In this guide, we cover how to go about getting a mortgage as a construction worker using the CIS scheme.

What are CIS Mortgages & How Do They Work?

If you don’t have 3 years of accounts or declare a low net profit, CIS mortgages are the ideal option.

The reason for this is that instead of using filed accounts, construction workers are allowed to apply for mortgages using the gross income on their payslip.

For self-employed individuals, CIS mortgages prove to be helpful in getting a better mortgage deal.

Self-employed individuals usually aim to write off as many of their expenses as they can against their earnings in an effort to reduce taxes.

For a self-employed person, this can have a negative effect on their mortgage application because lenders will base their affordability assessment and decision on the person’s net profit figures.

In such instances, self-employed people find themselves qualifying for low mortgage amounts.

The HMRC created the Construction Industry Scheme (CIS).

The scheme allows contractors to deduct money from subcontractors to pay the HMRC.

These are advance payments as contributions to a subcontractor’s National Insurance and tax.

Contractors do not need to register for the CIS, but contractors must.

If subcontractors fail to register for the scheme, the deductions from their earnings will be higher.

Subcontractors receive payslips that detail both net and gross income. This proof of income can be used when applying for a mortgage.

Using the Construction Industry Scheme, lenders can calculate whether the loan is affordable by assessing the gross income instead of net income.

When possible, the mortgage amount the individual qualifies for may be increased.

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Quick Overview of CIS Mortgage Benefits

Several benefits are expected when applying for a mortgage through the construction industry scheme.

For starters, CIS workers can borrow more, as lenders will assess their gross income instead of their net income.

As a result, you’ll have access to more viable deals.

While lenders usually need around 3 years of accounts to qualify, CIS workers can often provide just 1 year.

Eligibility Requirements for CIS Mortgages

The CIS is a scheme that’s only available to self-employed people working within the construction industry.

You’ll have to apply with a specialised lender, as not all cater to CIS scheme applications.

Lenders have their own criteria and assess each application based on individual merit.

Generally, criteria include:

  • 6 months CIS payslips (minimum of 3 in some instances
  • 6 months most recent bank statements (minimum of 3 in some instances)
  • Tax at 20% must be deducted on the scheme

How Much Can CIS Workers Borrow, and What is the Required Deposit?

How much you can borrow will depend on the overall affordability of the loan.

When applying via the CIS, the lender will review the last 3 to 6 months of the applicant’s bank statements.

A person’s gross income is used to calculate how much they make annually.

Of course, the average monthly expenses, other financial arrangements such as loans and credit cards, and credit scores will be used in the assessment process.

There’s a limit to how much an applicant can borrow, usually capped at four times their annual income.

A 10% deposit is recommended, but in some instances, mortgages can be made available with a 5% deposit.

Applicants looking for the best mortgage deal can benefit from saving more for a deposit.

A 15% to 20% deposit would be best advised in such instances.

Steps to apply for a CIS Mortgage?

The first step should always be to consult with a professional mortgage advisor.

The advisor who understands the industry and the construction industry scheme will be able to advise you on the ins and outs of applying for a CIS mortgage.

You should also follow these steps:

  • Check your eligibility

Working in the construction industry doesn’t automatically qualify you for a CIS mortgage.

In addition to proving your profession in the industry, you will need to prove the affordability of the loan instalments.

A professional mortgage advisor can be consulted to determine if your earnings will be eligible for the mortgage you’re interested in.

  • Have payslips available

You will need to provide your last 3 to 6 months of payslips for the lender to assess.

These will be compared with your bank statements.

  • Ensure your credit profile is accurate

It’s a good idea to check your credit profile on a regular basis to ensure it’s accurate.

If you’re worried that checking your credit score will negatively impact it, don’t be.

Checking your credit score is allowed and will give you an idea of what lenders can see when they do a credit check on you.

If you have bad credit, only certain lenders may be willing to assist you, but the rates may be higher while the mortgage amount is lower.

Construction Industry Scheme Mortgages Conclusion

If you’re a self-employed person in the construction industry in the UK, you’ll have access to better deals by applying via the construction industry scheme.

Registering with the scheme is a great step in the right direction.

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