CIS Mortgages: Complete Guide for Construction Industry Workers
Construction workers and contractors have traditionally faced significant challenges when applying for mortgages. Despite earning substantial incomes, many find themselves rejected by traditional mortgage lenders who struggle to assess self-employed earnings properly. If you’re registered under the Construction Industry Scheme and have been frustrated by mortgage applications, cis mortgages could be the solution you’ve been searching for.
Unlike conventional mortgage products, cis mortgages allow lenders to assess your borrowing capacity based on your gross income rather than declared net profit. This fundamental difference can dramatically increase your borrowing power and open doors to homeownership that seemed impossible through traditional routes. In this comprehensive guide, we’ll explain everything you need to know about cis mortgages, from eligibility requirements to application processes, helping you understand how these specialised lending arrangements could transform your homebuying prospects.
What are CIS Mortgages?
A CIS mortgage isn’t technically a separate mortgage product, but rather refers to how certain mortgage lenders assess income for workers registered under the Construction Industry Scheme. The key distinction lies in the income assessment methodology that can significantly benefit CIS workers seeking home loans.
Traditional mortgage lenders typically evaluate self-employed workers based on their net profit as declared in self-assessment tax returns. However, most CIS mortgage lenders recognize that this approach often undervalues the true earning capacity of construction workers who legitimately offset expenses against their gross income to minimize tax liability.
Instead of focusing on net profit declared in tax returns, CIS mortgage providers assess applications based on gross CIS income as evidenced by CIS payslips and bank statements. This approach acknowledges that construction workers often have substantial business expenses that reduce their taxable profits but don’t reflect their actual earning power.
The difference can be substantial. A CIS worker earning £4,500 monthly gross income might declare only £2,500 in net profit after offsetting expenses. Traditional mortgage lenders would base their assessment on the lower figure, while CIS-friendly lenders would use the higher gross amount, potentially doubling the available borrowing capacity.
This fundamental shift in assessment methodology makes CIS mortgages particularly valuable for self-employed construction workers whose gross pay significantly exceeds their declared income for tax purposes.
Understanding the Construction Industry Scheme (CIS)
The construction industry scheme is HMRC’s tax deduction system designed to ensure proper tax compliance within the construction sector. Under this scheme, contractors must deduct tax and national insurance contributions from payments made to subcontractors, forwarding these deductions directly to HMRC as advance payments toward the subcontractor’s annual tax liability.
Registration under the cis scheme is mandatory for most construction industry participants, including contractors who pay subcontractors and subcontractors who work for multiple contractors. The scheme covers a broad range of construction-related activities extending far beyond traditional building work.
Eligible trades include electricians, plumbers, decorators, roofers, scaffolders, architects, engineers, and surveyors. Even industries like landscaping, demolition, and site preparation fall under the construction industry scheme cis regulations. The determining factor isn’t the specific job title but whether the work involves construction, alteration, repair, extension, or demolition of buildings and structures.
When registered as a cis subcontractor, you’ll receive cis statements from each contractor showing your gross pay, tax deductions, and national insurance contributions. These documents become crucial evidence for mortgage applications, as they demonstrate your consistent income streams to potential mortgage providers.
Most lenders require cis workers to maintain registration for a minimum period before considering mortgage applications. This requirement helps lenders assess income stability and ensures applicants have sufficient documentation to support their borrowing requests.
Key Benefits of CIS Scheme Mortgages
Many construction workers struggle with traditional mortgage applications despite earning substantial incomes. The self-employed nature of construction work, combined with legitimate business expense deductions, often results in declared profits that don’t reflect true earning capacity. CIS mortgages address these challenges through several key advantages.
Higher Income Assessment
The primary benefit of CIS mortgages lies in how mortgage lenders calculate your borrowing capacity. Rather than basing assessments on net profit from tax returns, CIS mortgage lenders use your gross annual income as evidenced by CIS payslips and bank statements.
Most CIS mortgage lenders offer borrowing multiples of 4.5 to 6 times gross annual income, with some specialist providers extending to even higher multiples for applicants with excellent credit profiles and substantial deposits. This represents a significant improvement over traditional self-employed lending, where borrowing is typically limited to 4 times net profit.
Consider a practical example: A CIS worker earning £4,500 monthly (£54,000 annually) might declare only £30,000 in net profit after legitimate business expenses, which lowers your income tax. Traditional mortgage lenders would offer borrowing of approximately £120,000 to £135,000 based on the lower figure. However, CIS mortgage providers could offer £270,000 or more based on gross CIS income, representing a potential increase of over £150,000 in borrowing capacity.
This enhanced assessment approach recognizes that construction workers often incur substantial legitimate business costs – including vehicle expenses, tools, protective equipment, and materials – that reduce taxable profits without diminishing their ability to service mortgage repayments.
Reduced Documentation Requirements
Traditional self-employed mortgages typically require two to three years of complete business accounts, tax returns, and SA302 forms to demonstrate income stability. This requirement can be particularly challenging for construction workers whose income may fluctuate seasonally or who have recently transitioned to self-employed status.
CIS mortgages significantly reduce documentation requirements, with many lenders accepting applications based on just 12 months of CIS payslips and corresponding bank statements. Some specialist CIS mortgage lenders even consider applications with as little as six months of documentation, though longer trading periods generally improve available rates and borrowing terms.
The streamlined documentation process means faster application timelines and less paperwork burden. Rather than producing complex business accounts and detailed tax calculations, CIS workers simply need to provide recent CIS statements, bank statements showing payment deposits, and standard mortgage documentation like proof of identity and deposit source.
This reduced documentation requirement particularly benefits newer self-employed individuals who haven’t yet accumulated multiple years of trading history but have consistent CIS income patterns demonstrating their earning capacity.
Access to Better Mortgage Rates
Higher assessed income through CIS mortgage calculations often enables access to mainstream mortgage products with competitive interest rates. When your borrowing requirement represents a lower loan-to-value ratio relative to your assessed income, you become eligible for better mortgage rates typically reserved for lower-risk applicants.
Many major high street lenders, including Barclays, Santander, and Nationwide, now accept CIS income assessments for qualified applicants. This mainstream lender participation has increased competition and improved rate availability for CIS workers compared to relying solely on specialist lenders.
Additionally, the higher borrowing capacity may enable larger deposit contributions relative to property values, further improving available mortgage rates. A CIS worker who previously qualified for 90% loan-to-value mortgages under traditional assessment might secure 75% or 80% loan-to-value products under CIS calculations, accessing significantly better interest rates.
The combination of mainstream lender participation and improved loan-to-value ratios means CIS workers can often secure mortgage rates comparable to traditional employed borrowers rather than paying premiums typically associated with self-employed mortgages.
Eligibility Requirements for CIS Mortgages Explained
Qualifying for a cis mortgage requires meeting both cis scheme requirements and standard mortgage lending criteria. Understanding these requirements helps ensure successful applications and avoid common application pitfalls.
Primary eligibility centers on valid cis scheme registration with HMRC. Most cis mortgage lenders require applicants to have maintained active registration for at least 12 months, though some specialist providers consider applications with six months of trading history. The registration must be current and in good standing, with no significant compliance issues or outstanding tax liabilities.
Income consistency represents another crucial factor. Lenders typically require regular cis income over the assessment period, demonstrated through cis payslips and corresponding bank statements. While some income fluctuation is acceptable – reflecting the seasonal nature of construction work – significant gaps or declining income trends may require additional explanation or impact available borrowing amounts.
You’ll need to provide cis statements from contractors showing your gross pay, tax deductions, and national insurance contributions. These statements must be supported by bank statements confirming receipt of net payments, creating a clear audit trail of your income streams.
Standard mortgage criteria apply alongside cis-specific requirements. This includes minimum credit score requirements, affordability assessments based on all monthly commitments including credit card debt and existing loans, and proof of deposit source. Most lenders also require UK residency and may have age restrictions for lending terms.
Some lenders may request additional documentation such as contractor agreements or business insurance policies, particularly for applicants with irregular income patterns or those seeking higher borrowing multiples.
CIS Mortgage Deposit Requirements
Deposit requirements for CIS mortgages generally align with standard mortgage products, though the higher income assessment often improves borrowing capacity relative to property values. Understanding deposit options helps maximize your purchasing power and secure favorable lending terms.
Most CIS-friendly lenders offer mortgages with minimum deposits starting at 5% of property value, similar to mainstream mortgage products. However, these high loan-to-value products typically come with higher interest rates and may require mortgage insurance, increasing monthly payments.
Deposits of 10% to 15% generally unlock more competitive rates and broader lender choice. At these levels, many mainstream lenders become accessible, and the improved loan-to-value ratios result in better pricing. For CIS workers whose higher assessed income enables larger deposits relative to property values, this represents a significant advantage.
Deposits of 20% or more access the most competitive mortgage rates and terms. The combination of substantial deposits and strong assessed income often places CIS applicants in lenders’ lowest-risk categories, resulting in preferred pricing and flexible terms.
Gifted deposits from family members are generally acceptable to CIS mortgage lenders, subject to standard documentation requirements including gift letters and proof of donor funds. Some lenders may require the donor to obtain independent legal advice, particularly for larger gifts.
Deposit sources must be clearly documented through bank statements or other acceptable evidence. Lenders are particularly vigilant about anti-money laundering requirements, so ensure all deposit funds have clear audit trails and legitimate sources.
CIS Mortgages with Bad Credit
Poor credit history doesn’t automatically disqualify you from cis mortgages, though it may limit available lenders and affect pricing. Understanding how different credit issues impact applications helps set realistic expectations and identify suitable mortgage providers.
Specialist mortgage lenders often show greater flexibility with adverse credit for cis workers, recognizing that construction industry earnings can support mortgage repayments despite past financial difficulties. However, the severity, frequency, and recency of credit problems significantly influence available options.
Recent credit issues typically pose greater challenges than historical problems. Missed payments, defaults, or county court judgments within the past 12 months generally require specialist lenders and may result in higher interest rates. However, issues from 2-3 years ago may be acceptable to some mainstream lenders, particularly with strong recent credit performance.
The type of credit problem also matters. Missed credit card payments or utility bills are generally viewed less seriously than defaults on secured loans or previous mortgage difficulties. Lenders typically assess the overall credit picture rather than focusing solely on individual negative entries.
Larger deposits can help offset bad credit concerns. A cis worker with adverse credit but substantial deposit may access better rates than someone with perfect credit but minimal deposit. The reduced lending risk associated with lower loan-to-value ratios often outweighs historical credit concerns.
Some specialist bad credit cis mortgages are available even for significant credit problems including previous repossessions or bankruptcies, though these products typically require substantial deposits and come with higher interest rates.
We would always recommend sending us your credit report at the earliest point in the process. This helps your mortgage chances.
Which Lenders Offer CIS Mortgages?
The CIS mortgage market includes both mainstream high street banks and specialist mortgage providers, each offering different advantages and eligibility criteria. Understanding your options helps identify the most suitable lenders for your circumstances.
Major high street lenders increasingly recognize CIS income for mortgage assessments. HSBC, Halifax and NatWest all consider CIS applications, though their criteria and documentation requirements vary. These mainstream lenders typically offer competitive rates but may have stricter eligibility requirements around income consistency and credit history.
Barclays and Santander also accept CIS mortgages for qualified applicants, often with flexible approaches to income assessment and documentation. These lenders may offer preferential rates for customers with existing banking relationships or those meeting specific criteria.
Building societies often provide excellent options for CIS workers. Leeds Building Society and Coventry Building Society both offer CIS-friendly mortgage products, frequently with more flexible underwriting approaches than larger banks. These mutual organizations may consider applications that mainstream lenders decline.
Specialist mortgage lenders focus specifically on non-standard applications including CIS mortgages. Kensington Mortgages, Bluestone, and Foundation Home Loans all offer products designed for construction industry workers. While rates may be higher than mainstream alternatives, these lenders often accept applications with shorter trading histories or credit issues.
Most CIS mortgage lenders vary their criteria around minimum income levels, required trading periods, and acceptable deposit amounts. Some focus on prime CIS applicants with perfect credit, while others specialize in adverse credit CIS mortgages.
Working with mortgage brokers experienced in CIS applications often provides access to a broader range of lenders and more competitive terms than direct applications.
How to Apply for a CIS Mortgage
Successfully applying for a cis mortgage requires careful preparation and often benefits from specialist mortgage broker expertise. Understanding the application process helps ensure smooth processing and increases approval chances.
Using specialist mortgage brokers with cis expertise typically produces better outcomes than direct lender applications. These professionals understand which mortgage lenders offer the most suitable products for your circumstances and can present applications in the strongest possible light. A good mortgage broker can often access exclusive rates or negotiate terms not available through direct channels.
Documentation preparation forms the foundation of successful applications. You’ll need 3-6 months of recent cis payslips showing consistent income patterns, corresponding bank statements confirming receipt of payments, proof of identity and address, and evidence of your deposit source. Some lenders may also request cis registration certificates or tax year summaries.
Organizing documentation chronologically and ensuring all payments shown on cis statements correspond to bank deposits helps streamline underwriting. Any gaps in income or irregular patterns should be explained upfront rather than leaving lenders to make assumptions.
Timeline expectations vary by lender and application complexity. Decision in principle applications typically receive responses within 24-48 hours, providing confidence to proceed with property searches. Full mortgage approvals generally take 2-4 weeks, assuming complete documentation and straightforward circumstances.
Property valuations and legal processes follow standard mortgage timelines, though some specialist lenders may have preferred surveyor panels or specific legal requirements. Your mortgage broker should coordinate these elements to ensure smooth completion.
Common application pitfalls include incomplete documentation, unexplained income gaps, and applying to unsuitable lenders. Working with experienced advisors helps avoid these issues and presents applications to the most appropriate mortgage providers.
CIS Mortgage Costs and Fees
Understanding the full cost structure of CIS mortgages helps budget accurately and compare different lending options effectively. While rates have become increasingly competitive, several factors influence total borrowing costs.
Interest rates for CIS mortgages in 2024 typically range from 4.5% to 7%, depending on deposit size, credit profile, and chosen lender. Mainstream lenders generally offer rates at the lower end of this range for prime applicants, while specialist lenders may charge premiums for higher-risk cases or those with adverse credit.
Rates vary significantly by loan-to-value ratio. Borrowers with 20% deposits may access rates around 4.5–5.5%, while those with minimum deposits might pay 6–7% or more. The substantial difference emphasizes the value of larger deposits where possible.
Arrangement fees and product costs vary by lender type. Many mainstream lenders charge arrangement fees of £999–£1,999, though some offer fee-free products with slightly higher rates. Specialist lenders may charge higher fees, sometimes £2,000–£3,000, reflecting their more complex underwriting processes.
We are a fee-free broker for CIS contractors, but some broker fees elsewhere can apply when using mortgage advice services—typically ranging from £500–£2,000 depending on case complexity and broker expertise. While this represents an additional cost, specialist CIS mortgage advice often secures better rates or terms that offset the fee through reduced monthly payments.
Additional costs include property valuations (£250–£800), legal fees (£800–£1,500), and mortgage protection insurance where required. Some lenders offer incentives like free valuations or legal fee contributions to offset these costs.
Early repayment charges may apply if you repay or remortgage during initial rate periods, typically 1–5% of the outstanding balance. Understanding these charges helps evaluate the true cost of different mortgage products.
Conclusion
Cis mortgages represent a significant opportunity for construction industry workers to access better borrowing terms and achieve homeownership goals that might seem impossible through traditional mortgage routes. By recognizing gross cis income rather than net profit declared for tax purposes, these specialized lending arrangements can dramatically increase borrowing capacity while reducing documentation requirements.
The key to success lies in understanding your options and working with mortgage advisers who specialize in construction industry scheme mortgages. Whether you’re a new cis contractor with limited trading history or an experienced worker looking to maximize your borrowing power, the right approach can unlock competitive rates and favorable terms.
If you’re ready to explore your cis mortgage options, consider consulting with a specialist mortgage broker who can assess your circumstances and identify the most suitable lenders for your needs.
Our mortgage brokers at Alexander Southwell are whole of market advisers and strive to get all directors the best mortgages possible based on their circumstances.
Try Our Mortgage Calculator’s Below!
