Mortgages for Company Directors
Getting a mortgage as a company director can feel challenging, especially if much of your income comes from your own business. Whether you’re a first-time buyer or an existing homeowner looking to move (a home mover), being a director means lenders may assess your finances a bit differently than a standard salaried employee.
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What is a Company Director Mortgage?
A director mortgage refers to a regular residential mortgage obtained by someone who is a director of a company. In practice, it means the applicant’s income comes from their own limited company, so lenders often treat them as self-employed for mortgage purposes.
In other words, even if you draw a director’s salary, if you own a significant share (usually 20–25% or more) of your company, most lenders will categorize you as self-employed when you apply for a mortgage.
From a lender’s perspective, this can make your verified personal income appear lower on paper than it really is, leading to additional scrutiny.
The encouraging news is that there are plenty of lenders who specialise in mortgages for company directors, so you won’t be stuck with no options. As long as you meet the lender’s criteria (such as proving your income and having a reasonable deposit and credit history), you can get a mortgage to buy a home or refinance – even if you are self-employed through your own company.
How Company Director Mortgages work?
Company Director mortgages work much like any other mortgage, but the key difference is how lenders evaluate your income and financial records. Here are the main aspects of how the process works for company directors:
- Proof of business income: As a director, you will usually need to provide company accounts and/or tax returns to verify your income. Most lenders like to see at least one to two years of trading history for your business before approving a mortgage. Ideally, having two full years of accounts is best, but some lenders can consider those with just one year’s accounts (this is less common and often requires other strengths in your application).
- Income assessment (salary, dividends, and profit): Lenders will assess how much you can afford by looking at your income. For most company directors, income comes in multiple forms (a salary you take from the company, dividends, and possibly retained profit). Many lenders will only count the income you’ve actually withdrawn from the company – that is, your salary plus dividends – when calculating affordability, and will not include profits that you left in the company.
- Affordability and tax efficiency: As a director, you might have been advised by your accountant to take a small salary (e.g. up to the tax-free threshold) and the rest as dividends to minimize tax. This is smart for tax purposes, but it can pose a challenge for mortgages since it makes your personal income look smaller. Lenders perform affordability checks by comparing your income to your outgoings and the potential mortgage payments. If your reported personal income is low, you might not pass the affordability tests for the mortgage amount you want – even if your business is actually very profitable. It’s a bit of a balancing act. Some directors choose to increase the salary/dividends they take in the year or two before applying for a mortgage to boost their provable income. Others work with specialist lenders who understand that the company’s net profit (even if not taken out as salary) reflects the true earning power of the director.
- Deposit and credit requirements: In terms of deposit and credit score, mortgages for directors function the same as any other mortgage. You’ll generally need a minimum 5% deposit for residential purchases (which allows a 95% loan-to-value mortgage) if you have a solid application. However, if your situation is more complex – say you have weaker credit or only a short trading history – lenders may require a larger deposit (often 15% or more) to offset the perceived risk
How much can I borrow if I'm a company director?
The amount you can borrow as a company director depends on the same fundamentals as any mortgage: primarily your income and affordability, as well as your outgoings, credit profile, and the lender’s own rules. Typically, lenders cap mortgages at roughly 4 to 4.5 times your annual income, and in some cases up to around 5 times income (a few may go to 5.5× for high earners or special scenarios)
For most lenders, if you’re classified as self-employed (which many directors are, as discussed earlier), they will look at your average income over the past 2–3 years from your business. In practice, for a director, this usually means your salary + dividends from the company averaged over the last couple of years (if your income has been stable or rising). If your latest year’s income was lower than previous years, some lenders might even use the lower recent figure or an average that includes the lower figure, to be cautious.
The good news is that some lenders take a more flexible approach. There are a few that will consider your most recent year’s income on its own (especially if you can show the increase is sustainable and not a one-off)
There are also specialist lenders who understand how company profits work. Instead of looking only at salary and dividends, they might be willing to include your share of the company’s net profit in the calculation of income. This can make a huge difference in how much you can borrow. For instance, consider a case where a director’s personal salary+dividends are £50,000, but their company actually made £250,000 in profit. A typical lender might treat the income as £50k and offer maybe £250k (if using a 5× income multiple). However, a lender that counts your share of the profit could treat your income as £250k, which at a 5× multiple would imply a theoretical £1.25 million borrowing capacity.
In practical terms, to estimate how much you can borrow, you’ll want to determine what figure lenders will use as your annual income. This might be:
The average of your last two years’ salary + dividends (for many self-employed-friendly lenders), or
Just your latest year’s salary + dividends (if using a lender that accepts an uptrend and takes the latest year), or
Your salary + dividends + share of net profit (if using a specialist lender that counts retained profit), or
If you’re a minority shareholder, possibly just your salary (for lenders who deem you an employee and don’t count dividend income at all)
Once you have that figure, most lenders will cap the mortgage around 4 to 5 times that income, assuming you have no other major debts and your credit is good. Some may do more if you meet certain criteria (like high income, or a larger deposit). Keep in mind lenders also look at affordability in terms of monthly budget: they’ll factor in your expenses, any loans/credit card payments, and the estimated mortgage payment to ensure you can comfortably afford the loan. So, the absolute maximum based on income multiples isn’t guaranteed – you must also pass the lender’s affordability stress tests.
Who can help you find the best deal?
Finding the best mortgage deal as a company director can be tricky, simply because there is so much variation in how different lenders will assess your situation. This is where working with a knowledgeable mortgage broker or adviser can make a world of difference.
Here are some ways an expert can help you, and key factors they consider when matching you with a lender:
Using your latest year’s income (if higher): Many lenders average 2–3 years of your income, but if your business is growing year-on-year, that average may underestimate your true earnings. Some lenders are willing to use just the most recent year’s figures.
- Lenders that include retained profit: As discussed, a few specialist lenders will consider your share of net profit in addition to (or even instead of) your director’s salary and dividends. If you tend to leave profit in the company, these lenders can potentially lend you much more than a traditional lender would.
- Options for limited accounts or new businesses: If you only have one year of accounts, or your company was set up recently, a broker can point you to the niche lenders that accept just 1 year of trading history or accounts.
- credit issues or complex finances: If your situation involves any complexity – for example, you have a poor credit history, multiple income streams, or you draw income in an unusual way – a broker’s guidance is invaluable. They will know which lenders are more forgiving of past credit blips, and which ones have flexible criteria for self-employed income.
Can you get a mortgage as a company director with a poor credit history?
Yes, it is possible to get a mortgage as a company director even if you have a poor credit history, but it will be more challenging. Just like any other borrower, having issues like late payments, defaults, County Court Judgments (CCJs), or bankruptcies in your credit file makes lenders more cautious. For a company director, the process isn’t fundamentally different – you’ll need to find a lender that is willing to accept the risk of your adverse credit. The availability of lenders and the terms you’ll get (interest rate, required deposit, etc.) will depend on how severe and how recent your credit problems are.
For relatively minor credit issues – say a missed credit card payment a year ago or a small default from a few years back – there are quite a few lenders who might still approve your mortgage, especially if you have an otherwise solid application (good income, low debts, decent deposit).
However, if you have major or multiple credit problems – such as recent CCJs, a history of unpaid debts, a prior bankruptcy, or a low credit score due to many issues – then the number of lenders willing to offer you a mortgage shrinks considerably.
Mainstream high-street banks are likely to decline in those cases, but there are specialist bad credit mortgage lenders who will consider your application. These specialist lenders evaluate risk differently and may approve directors (and other borrowers) with poor credit, though usually under stricter conditions.
Ready to take the next step?
If you have more questions about getting a mortgage as a company director – or if you want tailored advice for your own situation – we’re here to help. Book a fee-free mortgage discovery call with our team today to discuss your needs and find out what options are available.
Your home may be repossessed if you do not keep up repayments on your mortgage.
