Mortgages using retained profits

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Can I get a mortgage using retained profits?

Yes, you can get a mortgage using retained profits! If you’re a business owner, and you haven’t used your profit yet, you might want to use that retained profit to get a mortgage. However, it can be difficult to do this because some lenders don’t like to accept your profit as an income amount.

The way mortgage lenders calculate affordability if you’re a business owner is usually by looking at your dividend income on top of your salary.  But quite often, your retained profits work out much higher than your dividend income and salary combined, so it’s pretty natural to want to use that amount instead because it can mean you could borrow more. 

Lenders have their own way of doing things, and a lot of them will stick to their policy of not using retained profits to calculate mortgage affordability. They do this because they think that you should use your own personal income instead of the business income. 

But there's still specialist lenders who will calculate a mortgage based on retained profits available to you. And that’s where we come in. Our Mortgage Experts have plenty of experience getting mortgages using retained profits, and will make your application look as good as possible to lenders.

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Why should I use retained profits for a mortgage?

Generally, lenders will look at a combination of your paid salary and income from dividends when calculating how much you can afford to borrow. But in many cases, your retained profits will be higher than this, which means you’ll be able to borrow more.

Obviously this depends on your circumstances as a business owner, but it could mean you can get a bigger mortgage. And you could then afford a bigger property.

Can I borrow more on a mortgage if I use retained profits from my business?

Yes, you could borrow more money if your retained profits work out as a larger amount than your dividends and salary combined. If you work with a specialist mortgage broker and find a lender who accepts retained profits, then you should be able to do this.

Most lenders work out your affordability as a business owner by calculating the total amount of your dividends and salary, then they multiply that amount by 4x - 5x. 

For example, if your business net profit was £250,000, your dividends were £20,000 and your salary was £7,500, most lenders would calculate your annual income as £17,500. However, if you can get a mortgage with a specialist lender who will take into account your retained profits, you will be able to afford a larger mortgage with a minimum value of £500,000.

How can I get a lender to accept my retained profits to get a larger mortgage?

Not all mortgage lenders will accept retained profits as a way of getting a mortgage. You’ll almost certainly have to apply to a specialist lender. Specialist lenders aren’t the big names you see on the highstreet, and they won’t turn up in your online searches. In order to find one of these lenders, you need to work with a specialist mortgage advisor. Advisors have the relationships and knowledge of dealing with situations like yours so will know which lenders to approach.

Many mortgage lenders work on an automated system. This means that when you send your details to them, a computer analyses your situation against their lending criteria. If your situation doesn’t match their criteria, like you want to use retained profits as income, the computer will literally just say “No”. 

Luckily, mainstream and high street lenders aren’t the only option for getting a mortgage. There are specialist lenders who’ll be willing to look at your application on a case-by-case basis. They’re much more likely to be flexible, assess you personally and accept retained profits. Our Mortgage Experts have great relationships with specialist lenders, and will know which one to approach for you. Get a mortgage.

What counts as my income as a company director?

This will depend on what type of company director you are. 

For example, if you’re a sole trader, lenders will look at your business’s bet profits as proof of your income. If you’re in a partnership, lenders will look at your share of the net profit. And if you’re a limited company director, most lenders will look at your salary and dividends or your share of the net profits.

Read more in our Guide: How to Get a Mortgage as a Limited Company Director.

Why use Haysto?

We get how it feels when you’re refused a mortgage. We’ve been there. Haysto exists because the mortgage world is broken. If you don’t have a shiny credit rating, you’re self-employed with a complex income, or just don’t fit the mould, the odds are completely stacked against you. We just don’t think that’s fair.

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