Limited Company Director Mortgages


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Our team of approachable mortgage advisers is dedicated to helping you. We work tirelessly to match you with the perfect lender from our extensive network, streamlining the process and sparing you headaches. Reach out to us for a complimentary, no-obligation discussion with an adviser about the best mortgage solution for your needs.

Please note that the Financial Conduct Authority does not regulate certain Buy-to-Let Mortgages.

What is remortgaging and how does it work?

Remortgaging is changing your current mortgage deal to a different one. It could be with the same provider or potentially with a new lender.

A lot of people look at remortgaging because they want to, for example, take money out of the house to do work on their property. At the end of an initial mortgage term such as a fixed rate deal, if you don’t remortgage you will be moved to the Standard Variable Rate – and interest rates tend to jump up quite a bit.

There’s also something known as a product transfer, which is where you take a new product with your existing lender. A product transfer ultimately involves the lender pressing a few buttons to switch you over to a suitable product at that point in time.

How do I prove my income and document my trading history?

There are three essential components to securing a mortgage. Firstly, your deposit plays a crucial role, followed by the importance of maintaining a good credit score. The third aspect involves demonstrating your income.

For a limited company director like yourself, proving income isn’t as straightforward as presenting a few payslips. Even if you receive a direct salary from your business, lenders typically require your business accounts from the last two years. They meticulously examine your net profit, expenses, and income streams, along with assessing your director’s salary and personal tax information. This comprehensive review provides lenders with a comprehensive understanding of both you and your business.

While most lenders request two years’ worth of accounts, there are niche lenders who may consider your application even with just one year of business history.

Are there mortgages tailored to limited company directors?

Mortgages aren’t specifically tailored for limited company directors, but many lenders have criteria that can greatly benefit clients in this position. Throughout our discussion, we’ll delve into these details further. Certain lender criteria can offer significant advantages to limited company directors, and we’ll explore how these factors can positively impact your mortgage options.

How is income assessed as a limited company director?

Certain lenders offer criteria that are particularly advantageous for limited company directors in comparison to sole traders. While many lenders typically assess the money you’ve taken out from the business, such as your profit, direct salary, or dividends, there’s often additional profit within the business that can contribute to your affordability.

For instance, if you own 100% of the business, we consider both the director’s salary you’ve received and the net profit earned by the business. This means that even if you haven’t withdrawn all profits from the company, we can still factor them into your affordability assessment.

On the other hand, if you own 50% of the business and it generated a profit of £100,000 last year, we utilize your full salary but only your share of the profits, in this case, £50,000, to determine the amount you can borrow.

Do dividends count as income for a mortgage?

Indeed, different lenders have varying approaches. Typically, lenders assess what you’ve drawn from the business, including your director’s salary and dividends, often averaging them over the last two years to determine your borrowing capacity.

Some lenders may focus solely on the most recent accounts, considering only your dividends and salary for that year. However, for those seeking larger borrowing amounts, opting for a lender that evaluates both your director’s salary and the business’s profit can be more advantageous.

By considering the business’s profitability alongside your salary, you may qualify for a higher borrowing amount, as dividends are typically tied to the company’s earnings. This approach offers greater flexibility and potential for securing a more favorable mortgage deal.

What about if I have a fluctuating income?

The concept of fluctuation can be interpreted in various ways, depending on the context.

For instance, if your business has experienced an upward fluctuation, where your profit increased from £50,000 to £100,000 in the latest year, most lenders typically consider the average of your last two years, using £75,000 for affordability calculations.

However, some lenders may be willing to base their assessment solely on the most recent year’s accounts, particularly if there’s a valid reason for the profit increase.

Conversely, if your profit decreased from £100,000 to £50,000, lenders often inquire about the reason for the decline and may use the lower figure of the two years to determine your borrowing capacity.

Speak to an expert

Our seasoned advisers stand prepared to assist you whether you’re purchasing or refinancing a home. We’re dedicated to safeguarding your property and lifestyle while also streamlining the process, saving you valuable time and effort. Count on us to secure a competitive deal tailored specifically to your needs.

What about pay as you earn income?

Because it’s your business, many lenders wouldn’t consider PAYE income for affordability. However, if your director’s salary is clearly documented on tax year overviews and in the limited company accounts, it’s typically acceptable. Lenders classify you as employed when you’re a director of a company, but this distinction may not apply if you own 100% of the business.

If you own a smaller percentage of the business, like 15% or 20%, and receive a PAYE salary, some lenders may categorize you as an employee rather than a limited company director. However, there’s significant variability in lender policies.

As a rule of thumb, if you’re a 100% business owner, you might not be able to utilize the full PAYE income unless it’s thoroughly documented in your tax year overviews and tax computations.

Can you use net profit when applying for a mortgage?

Yes, it depends on the lender you choose. If your goal is to maximize your borrowing potential, it’s typically advantageous to seek out a lender that considers your net profit. This is because not all of your income is necessarily withdrawn from the business.

Opting for a lender that assesses your net profit after tax can often result in a slightly higher borrowing capacity compared to those that only consider withdrawn income. While many lenders calculate affordability based on post-tax net profit, there are niche lenders that evaluate pre-tax net profit, which can significantly impact the loan amount you qualify for.

How does it work if you have gone from sole trader to a limited company recently?

This is a question that’s on the minds of many, and rightfully so, as it sets the parameters for your property search.

Determining how much you can borrow as a limited company director varies significantly, underscoring the importance of seeking guidance from a mortgage broker or financial advisor. By assessing your unique circumstances, we can provide clarity on your borrowing capacity based on your income.

Typically, lenders consider the average of your last two years’ accounts to ascertain your net profit and salary. Your borrowing potential usually falls within the range of 4.5 to 5.5 times that income, depending on the lender’s criteria.

Some lenders may solely review your most recent accounts. This underscores the necessity of consulting with an expert like myself. With a personalized approach, we can navigate your situation and identify the optimal path to realize your objectives.

How much can I borrow and what deposit will I need?

Most lenders are accommodating in such cases, but there are certain considerations to keep in mind. For instance, if someone transitions from one profession to a completely unrelated one, like from being a mortgage broker to opening a zoo, it might pose challenges.

However, if the transition involves staying within the same industry, such as a plumber or a carpenter transitioning from sole trader to limited company, most lenders are receptive. They typically assess the last two years’ self-assessment tax returns, SA302s, and tax year overviews to determine borrowing capacity. As long as the individual remains within the same line of work, securing a mortgage is feasible.


How can a mortgage advisor help?

Here’s my genuine advice for limited company directors: Preparation is key. If you’re contemplating buying a property within the next six to 12 months, it’s wise to have an early conversation with a mortgage advisor.

We can help you estimate your borrowing capacity, calculate potential monthly repayments, and assess your available deposit. There’s nothing more disheartening than falling for a property only to discover it’s beyond your financial reach.

By initiating this discussion upfront, before you start your property search, we can ensure you embark on your home-buying journey with clarity and confidence.


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