Getting a mortgage as a CIS contract worker isn't as difficult as you might believe. Many lenders consider applications from construction company subcontractors employed under the scheme. In fact, some will do so 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