CIS Contractor Mortgages Explained

Learn the key criteria to getting a mortgage as a Construction Industry Scheme (CIS) subcontractor

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Graham Cox
CeMAP Mortgage & CPSP Specialist Finance Advisor

Getting a mortgage as a CIS contract worker isn't as difficult as you might believe. In fact, some lenders will consider an application with just a few months payslips.

This guide describes the different ways the CIS contractor income is assessed, what documents you need and how your maximum borrowing amount is calculated. We also discuss how lenders view any adverse credit.

Read on to find out more...

What is a CIS contractor mortgage?

A CIS mortgage is simply a catch-all term for a mortgage taken out by a borrower registered as a sub-contractor under the Construction Industry Scheme.

There are no dedicated CIS mortgage products as such, though one or two lenders have contractor-specific mortgage ranges.

In fact, in most cases, CIS subcontractors have access to the same mortgage deals as any other type of self-employed or employed applicant.

What is different is how banks, building societies and specialist mortgage providers assess income from a CIS applicant.

In specific circumstances, some lenders will treat construction workers and tradespeople working as CIS contractors as employed for income verification, even though the applicant is self-employed.

This can have huge ramifications for how much the applicant can borrow, and what proof of income is required.

How will lenders assess my CIS income?

How CIS contractor income is assessed is lender dependent. Many providers only consider CIS contractors on a self-employed basis, regardless of circumstances.

Others may assess you as employed if certain criteria are met. Applicants employed directly by a CIS contractor construction company on Pay As You Earn (PAYE) are also treated as employed.

Consideration on an employed basis usually makes qualifying for a contractor mortgage more straightforward. The following comparison shows why...

Income verification for self-employed CIS contractors

Mortgage companies typically require you to provide:

  • two year's accounts or SA302s/tax calculations
  • your last three months personal bank statements
  • your last three months business bank statements
  • a copy of your current contract

Lenders usually take an average of the last two years':

  • sole trader's gross income before tax
  • company director's share of net profit after corporation tax, plus salary OR...
  • company director's salary and dividends

There are exceptions, and a few providers are happy to use the latest year's figures if profits are increasing.

It's also possible to get a mortgage with just one year's trading history, though only a few mortgage companies accept this.

Income verification for employed CIS contractors

The documents typically required for a CIS applicant to be treated as employed are:

  • latest 3 months payslips, invoices or statements of deduction
  • corresponding last three months personal bank statements
  • corresponding last three months business bank statements
  • a copy of your current contract.

Personal bank statements are accepted where the borrower is a sole trader with a combined personal and business bank account.

The criteria for a CIS applicant to be treated as employed for mortgage purposes is defined by each lender, but some or all of the following criteria may apply:

  • one to two years continuous employment (regardless of employment status) in the same type of work / construction industry.
  • tax is deducted at source by the contractor construction firm or an umbrella company
  • the applicant only subcontracts for one company
  • he/she doesn't employ any other contractors

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How much can I borrow?

How much you can borrow as a CIS contractor depends the mortgage provider's lending criteria, appetite for risk and how they calculate affordability. The latter is particularly salient at the moment due to the cost of living crisis.

It also depends on whether you're treated as self-employed or employed for income assessment.

Mortgage borrowing if you're considered a self-employed CIS contractor

Most banks and building societies will lend at a Loan-To-Income (LTI) of 4.5 times your self-employed income, averaged over the last two years figures.

The lender will then make deductions for any ongoing commitments like spousal support, child maintenance, credit card bills, car finance, life insurance premiums and so on.

They will also consider the estimated cost of building and contents insurance for the property you're buying.

If it's a flat or apartment, ground rent and/or service charges are also taken into account.

As an example, let's assume your self-assessment tax calculations show gross income before tax of £62,000 for the 21/22 tax year and £48000 for 20/21. You could potentially borrow up to £247500 (4.5 x £55000) before any deductions.

That figure rises to £279,000 with a lender who works off just your latest year's income.

Mortgage borrowing if you're considered an employed CIS contractor

Eligible income for mortgage affordability is calculated using a different formula if you're treated as an employed CIS contractor.

The most common method is to take the average monthly income figure from your last three months payslips, and calculate the income on a 46 week basis.

Here's the math on an average £5000 monthly income:

  • 5000 x 12 months = £60,000
  • £60,000 / 52 = £1153.85 per week
  • 46 weeks x £1153.85 = £53077
  • £53077 x 4.5 LTI = £238847 maximum borrowing, subject to deductions

Some mortgage companies use 48 weeks income and one or two the full 52 weeks.

What if I have bad credit?

Applications from CIS contractors with adverse credit are considered by some lenders.

Like most things in life, the devil is in the detail.

Heavy adverse like recent missed mortgage payments, multiple high value CCJs, an IVA or ex-bankruptcy, will make it more difficult as well as more expensive to secure a mortgage.

In most cases, only specialist lenders will consider it, and they tend to charge much higher interest rates.

On the other hand, many mainstream banks and building societies will consider light-adverse applications. For example:

  • one or two non-recent missed credit card payments
  • a low value default on a utility bill
  • a parking ticket CCJ

Book a call back and save your most valuable business asset...time.

"Brilliant from start to finish. Graham managed to find a main high street lender who offered a brilliant rate. Would highly recommend."

Tracy Boyle - Google Business Review
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Getting CIS mortgage advice

Finding the best CIS mortgage deal from the scores of lenders and hundreds of products available is a time-consuming task.  

When you instruct SEMH, we'll source the cheapest pound-for-pound deal for your circumstances, needs and preferences to save you the time and hassle of doing it all yourself.

We offer fast and 5 * rated professional service, specialist advice and will guide you every step of the way.

On our free 15 minute discovery call you'll learn if your case is proceedable, how much you can borrow and get to ask any questions you have. And there's no-obligation whatsoever.

Get in touch today to speak to a friendly advisor. Call 0117 205 0655 or get started here. We look forward to helping you find a great mortgage deal.

Graham Cox - MLIBF CeMAP Mortgage Adviser & Director of Hub FS Ltd

About the author

Graham Cox is the founder of Self Employed Mortgage Hub, the trading name of Hub FS Limited.

Based just north of Bristol, SEMH is an independent, whole of market broker and a true specialist in self employed mortgages, helping business owners across the UK get great mortgage and protection deals.

Graham's market commentary and analyis is regularly quoted in the national press and media, including The Guardian, Telegraph, FT Adviser, and BBC Radio Bristol.