CIS Mortgage Daily Rate
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CIS Mortgage Daily Rate
David Sharpstone explains how the mortgage process works if you are a CIS contractor on a daily rate.
Podcast approved by The Openwork Partnership on 12/03/2025
Can a CIS contractor on a day rate get a mortgage? How does it work?
If you’re on a day rate – or even an hourly rate, as that can work out as a day rate – and you’re paid through the CIS scheme, absolutely, you can get a mortgage. In fact, that’s probably the easiest way to calculate how much you can borrow.
If you’re getting £200 a day and working five days a week, that’s £1,000 a week. I would look at that and allow for you to take five or six weeks off a year as holiday, like most people do. That would give us a usable income of around £46,000 a year.
Who can get a contractor daily rate mortgage? Do they have to be a part of the CIS scheme?
It just depends on how we want things to be assessed. If you’re a CIS contractor paid through the CIS scheme, typically it will be an average of your last three months’ income with most lenders.
If you are a contractor, however, that can be entirely different – especially if you have a fixed term contract. CIS workers don’t have those. The contract might specify that you will be paid £200 a day until the end of March 2026, for example.
Contractors like this who are not paid through the CIS scheme can also get a daily rate mortgage, although that’s not the focus of today’s episode.
How are day rate mortgages calculated? How do lenders calculate a daily rate CIS contractor’s annual income?
So you’re paid through the CIS scheme and you’ve got a daily rate. I normally find that on an agreed daily rate, CIS subcontractors often work more hours than specified. Rather than doing a multiple of the days you’ve worked that particular week and calculating your annual income from that, mortgage lenders will often take an average across a three-month period.
Even if you’ve got a daily rate and you work overtime on that, it will all be factored into the equation on how much you can borrow.
What’s the minimum income needed for a CIS contractor to get a mortgage?
There’s no minimum. Perhaps an entry level, self-employed CIS subcontractor may be earning the equivalent of £18,000 a year. It would be quite difficult to get a mortgage on £18,000 because before even thinking about paying your mortgage every month, you’ve got your bills, you’ll need food and you’ve got other expenses like utilities.
There would probably be a minimum needed to get a mortgage, but I can’t say exactly what that is as it’s so variable. If you’re buying a property in Manchester for £100,000 and you’ve got a £50,000 deposit, maybe £18,000 income is enough, for example. It all depends on the size of the mortgage you need and the deposit you have to put down.
What proof of income does a daily rate contractor need to provide when applying for a mortgage?
If you’re paid through the CIS scheme and you’ve got an agreed day rate, the documents you need will be at the very least your last three months’ CIS payslips and corresponding bank statements to show that net income. That’s the income after the 20% tax being paid into your bank account.
That would be the easiest way to show your income as a CIS subcontractor.
Can a daily rate CIS contractor on PAYE get a mortgage?
There’s no such thing. If you’re on PAYE, you wouldn’t be paid through CIS. You’d just be employed.
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What if I’ve only recently become a CIS contractor?
I had this one come up this morning with a new client. We get this every day. There’s a real myth that you have to have been doing this for two years as self-employed.
The client I had this morning had been an electrician for the last 18 months, employed. He went to ask his boss for a pay rise, and they agreed as long as they could start paying him through the CIS scheme.
Effectively, that turned him from being employed to self-employed. You’re still a self-employed sole trader if you’re paid through CIS, even though it might still feel like you’re employed.
If you’ve only just become a CIS worker, but you’ve got at least 12 months history in that same line of work – even if that was employed – then, yes, you can get a mortgage with just three months’ CIS pay slips.
Do banks give mortgages to CIS contractors? What other options are there?
Every bank will give a mortgage to a CIS subcontractor. The difference though, is that the ‘subby-friendly’ mortgage lenders will use the before-tax CIS payslip income. Others don’t.
If you go to the wrong bank, they will calculate your mortgage affordability based on your profit after your expenses, normally over a two year average.
We all know how traders love to get their tax rebates every April, thanks to all those receipts you give to the accountant to keep your profit low and pay as little tax as legally possible. The problem with that is it yields a much lower lending figure.
But as a specialist mortgage broker dealing with CIS subcontractors, we’ll focus on the 15 or so lenders out there that use your payslip income. They don’t care about the self-assessments and profits after expenses. These subby-friendly lenders will calculate affordability from an average of the payslip income, before the tax is deducted.
That will always yield a much higher lending figure. So you can get a bigger, better property that’s going to better suit your needs by using your CIS income.
Do I need a specialist mortgage broker to help me?
If you’re brave enough to want to walk into the minefield of mortgage lending and all the nuances of each bank’s CIS criteria and policies, then go for it. Good luck trying to navigate that.
Failing that, you need a specialist broker. The reason is that there are so many things to consider about how you’re paid, the length of time you’ve been in your job and how long you’ve been with the same employer or construction firm.
Are you paid a day rate? Are you paid on price work? Have you taken any weeks off in the last three months? All of these things have to be factored in to make sure you go with the right lender.
If you think that you’ve got all the answers, you might stumble across the right lender just purely by luck. If not, then you need to deal with a specialist broker. And we’re here to help.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
CIS Mortgage Advice is a trading style of Just Mortgages Direct Limited which is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.
Approved by The Openwork Partnership on 12/03/2025
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