Subcontractor CIS Mortgage
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Subcontractor CIS Mortgage
David Sharpstone explains the mortgage process for CIS subcontractors.
Podcast approved by The Openwork Partnership on 05/02/2025.
Can a subcontractor who is a CIS worker get a mortgage?
Yes. If you’re a subcontractor and you’re paid through the CIS scheme, you can absolutely get a mortgage. There are around 15 mortgage lenders that recognise CIS pay – so instead of working out mortgage affordability using two years of profits, which is often quite low compared to your pre-tax, pre-expense income, those mortgage lenders use your CIS pay slips.
They look at your income before tax is deducted. They take an average of the last three, six or 12 months and work out your mortgage from your pre-tax, gross income on your pay slips.
That will always give a much bigger mortgage borrowing figure compared to those that are not paid through the CIS scheme. They have to rely on their profit after expenses on their tax calculation to get a mortgage. So if you’re paid through the CIS, you are in a really fortunate position when it comes to getting a mortgage.
What do CIS subcontractors need to qualify for a mortgage?
If you’re subcontracting, you’re paid through the CIS scheme and you’re looking to get a mortgage, then note these points. First of all, you have to have been working in the construction industry for at least 12 months. Some mortgage lenders might say two years, but 12 months is the minimum.
You need that track record. That might be as employed, as a regular sole trader or through a limited company, but you need to have worked in that environment. The next thing you need is a deposit, whether that’s 5% or 10%. The amount required will depend on your credit score.
You’re also going to need documentation – your payslips. I always ask my clients to provide 12 months’ payslips. I may not use them all, but it means that I can approach the full spectrum of lenders who accept CIS income. I might only need to use the last three months.
You’re also going to need bank statements for the last three months, showing that income being paid into your bank account.
Do different lenders have their own rules for CIS registered subcontractor mortgages?
Absolutely. Every mortgage lender that uses CIS income for affordability will have their own set of rules.
Some will work out mortgage affordability for using an average of three months’ pay slips. Some want to look at 12, which is good if it’s just after Christmas and you’ve downed tools for two weeks. Your last three months might look pretty poor – whereas 12 months is going to iron out those creases.
At the same time, using a lender that uses the last three months is great if you’ve been working really hard in that time, doing lots of hours. Those three months might be a much better and more reliable representation of your income.
Some mortgage lenders are okay if you move from week to week from company to company, working for different people. Other lenders get a little bit sniffy about it. Another thing that might come up is if you’ve set up your own limited company as a payment route. Some lenders will accept that, others won’t. There are various things we need to figure out.
Some lenders are concerned with how long you’ve been with the same company. They might need a six month payment history with an employer, while other lenders don’t care. There are lots of other things we need to consider, as mortgage lenders all have different rules.
Are there any special mortgage options for subcontractors who are CIS workers?
No. There’s no such thing as a CIS mortgage, even though that’s the name of our trading style, because a CIS mortgage is just a normal mortgage for people paid through the CIS scheme. We just go to mortgage lenders who understand CIS pay and will work with that within their criteria.
If you’re looking for a special deal or a better rate just because you’re paid through the CIS scheme, unfortunately you’ll be disappointed. However you will be treated by most mortgage lenders as employed rather than self-employed, which means you’ll get access to a fantastic range of products – the same they’d be offering to employed individuals.
What documents do CIS registered subcontractors need when applying for a mortgage?
You may only need eventually your last three months CIS payment and deduction statements – but as a mortgage broker, I’m always going to ask for the last 12 months.
You’re going to need evidence that money has been paid into your bank account – with bank statements to evidence that along with your day-to-day transactions. You need some ID. If you’re a foreign national living and working in the UK, you need evidence of your status in the UK, whether that’s settled, pre-settled on a visa or with indefinite leave to remain.
You also need evidence of your deposit, to show where the funds have come from – perhaps from savings or a gift. They’re the main things that you’ll need to have ready.
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How much deposit is needed for a mortgage if you are a CIS subcontractor?
If you’re paid through the CIS scheme and you’re a subcontractor working in the construction industry, you’re going to need a 5% minimum deposit.
Not every mortgage lender is going to give you a mortgage with a 5% deposit – they will cherry pick the borrowers with the best credit profiles to be eligible for a 5% deposit mortgage. That’s the starting point.
Having said that, I’ve organised four mortgages for CIS subcontractors with a 5% deposit just this week, so it can be done [podcast recorded in January 2025].
How much can CIS subcontractors typically borrow based on their income?
Let’s assume somebody that doesn’t have children and doesn’t have a partner or a friend joining them on the mortgage. We’re just basing it on one income. They don’t have any credit commitments like credit cards, loans or car finance.
The minute we put credit commitments and children into a calculation, it’s almost impossible to work out the borrowing without looking at credit reports and mortgage calculators.
But as a general rule of thumb, if you’re earning under £50,000 – so let’s say £200 a day, five days a week for 48 weeks of the year, that would give you an income of about £48,000. In those circumstances, with no children or commitments, you could borrow about 4.5 times your income.
If you’re earning at higher levels, perhaps £55,000 a year upwards, as your gross income before tax, then sometimes we can push the borrowing to 5.5 times income. So the mortgage will lie somewhere between 4.5 and 5.5 times your income. It might be less than 4.5 if you’ve got children and credit commitments.
As a mortgage broker, to find out how much you can borrow, I’d always have a detailed discussion with you, go through the credit reports and then figure it out specifically.
Can subcontractors who are CIS workers use their self-employed status to get a mortgage?
Absolutely. If you’re paid through the CIS scheme and you’re working in the construction industry, you can use your self-employed status to get a mortgage. The only reason that you might want to do that is if a mortgage lender is offering a slightly better deal than those lenders who accept CIS income.
Sometimes that is the case. A client might come to me and provide their CIS payslips and I’ll work out their gross income. Then I’ll look at their self-employed tax calculations for the last two years. Normally it gives a lower income, because we’re using the profit after the expenses.
But that income could be sufficient from their self-employed status to go for some of the best deals on the market that doesn’t accept CIS workers. In that case, we can use the tax calculations to get the best deal possible for the sort of mortgage they want.
More often than not, it isn’t sufficient, because self-employed people paid through the CIS scheme try to keep their tax bill as low as possible. They hold on to all their receipts throughout the year to effectively lower their profit.
Can subcontractors who are CIS workers and have a bad credit history still get a mortgage?
Absolutely. If you’re a subcontractor paid through the CIS scheme and you’ve got a less than perfect credit score, you can still get a mortgage. I did a mortgage for a client today that had a county court judgment three years ago and a default two years ago.
That’s quite a common thing. Even if you’ve got a less than perfect credit score, you can get a mortgage. Depending on how your credit history looks, you may need a slightly bigger deposit. If it’s pretty bad, you might need a 15% deposit.
Do you need to have worked as a subcontractor under the CIS scheme for a certain time to qualify for a mortgage?
You need to have worked for a minimum of one year in the industry. That doesn’t have to have been through CIS – you might have been employed, self-employed, or a company director. If you’ve been working in construction for a minimum of a year, that’s what’s needed.
You can’t just walk in from working in Tesco’s to now being a painter and decorator for the last two months and expect to get a mortgage – it just won’t be possible.
What can CIS subcontractors do to boost their chances of getting approved for a mortgage? Any top tips?
Check your credit report. I always ask my clients to visit CheckMyFile, because it shows TransUnion, Equifax and Experian side by side. You can see everything that the mortgage lenders can see and it gives you the opportunity to rectify any errors. If it’s terrible, you might need to wait a few months or a year until it’s a bit better.
Other things you can do is make sure that your payslips are all in order and you have them to hand. If you’re looking to get a mortgage, ask the people you’re working for to provide you with the last 12 months payslips for your mortgage broker.
Make sure the income on your payslips after tax, your net income, matches up with what goes into your bank account – because quite often different amounts get paid in. It might be because you’ve been paid extra for expenses, but that doesn’t appear on your pay slip. If there are discrepancies, make sure you’ve got the answers to explain to your mortgage broker.
Also, I would say that if you can get a 10% deposit together, it’s better than 5%.
What else do we need to know about getting a CIS mortgage as a subcontractor?
There are so many different variables to factor in if you’re a CIS subcontractor looking to get a mortgage. It could be how long you’ve been in a job for, how long you’ve been with the same company, whether you’re paid as an individual or whether you’ve set up your own company. Perhaps you’re paid on priced work or a day rate.
Maybe you’ve had some gaps recently… I could go on and on. Lots of different variables could come up. Trying to navigate that on your own can be really tricky, so I’d advise anybody in that situation to speak to a mortgage advisor that specialises in CIS subcontractors – such as myself.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Approved by The Openwork Partnership on 05/02/2025.
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- 5% Deposit
- Less than 3 years in the UK
- High day-rate with low net profit