Net Profit vs Dividends for Company Director Mortgages: How Lenders Really Assess Your Income
Many company directors face a frustrating problem when applying for a mortgage. You might run a profitable business, but because you pay yourself a modest salary and dividends to save on taxes, banks often offer you a much smaller mortgage than expected.
This guide explains why that happens, how specialist lenders can view things differently, and how Charlotte — one of our clients — doubled her borrowing power by using her company’s net profit.
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Why Low Declared Income Can Limit Your Mortgage
Method 1: Salary + Dividends Only
Most high street lenders look at your personal income — your director’s salary plus any dividends. If you deliberately keep these low for tax efficiency, lenders only see that reduced figure.
Ignoring Retained Profits
Any profit left in your company (retained profit) is usually ignored. That means even if your business is thriving, your borrowing power may look weak on paper.
Example:
Salary + dividends = £30,000
Typical lender multiple: 4.5×
Potential mortgage = £135,000
This is exactly what happened to Charlotte. Despite her profitable company, her bank capped her at £135k — far below what she needed.
Method 2: Salary + Share of Net Profit (Specialist Approach)
Some lenders add your salary to your share of company net profit (after tax).
This shows your true earning potential as a business owner.
Usually based on the latest year’s figures, not an average.
Example:
Salary: £15,000
Net profit: £65,000
Total income considered: £80,000
This difference can dramatically increase the mortgage size offered.
The Role of Specialist Lenders
Specialist and flexible lenders have criteria designed for Company Director Mortgages:
Consider salary + net profit rather than just dividends.
Base affordability on the latest year’s accounts.
Often require you to own at least 25% of the company.
May ask for an accountant’s letter if profits have jumped significantly.
This broader view of your finances can mean tens of thousands of pounds more in borrowing power.
Case Study: Charlotte’s Story
The Problem
Charlotte is a company director who earned around £30,000 in salary + dividends each year. Her bank offered her only £135,000, nowhere near enough to buy her £270,000 home — even though she had a 10% deposit.
The Solution
A specialist lender assessed Charlotte’s salary + her share of net profit from the latest year. Her company’s profits lifted her recognised income to about £60,000.
The Result
Mortgage offered: approx. £240,000
Deposit: £27,000 (10%)
House price: £270,000
By considering her true income, Charlotte’s borrowing power doubled. She secured the home she wanted — something impossible under the standard method.
Tips for Company Directors Seeking a Mortgage
1. Work With a Specialist Broker
They know which lenders use net profit instead of just dividends.
2. Keep Accounts Up to Date
The latest year’s figures often carry the most weight.
3. Ask Your Accountant for Support
A letter confirming growth or retained profits can reassure lenders.
4. Plan Ahead
Think about how your income will appear on paper before you apply.
5. Don’t Give Up After One Rejection
Different lenders apply very different rules — Charlotte is proof of that.
Frequently Asked Questions
Can retained profits count towards my mortgage?
Yes, some lenders will include retained net profits in your income, but usually only if you own a significant share of the company and an accountant confirms it won’t harm the business to withdraw them.
Do I need three years of accounts?
Many mainstream lenders want 2–3 years, but some specialist lenders accept just one year if it’s strong and stable.
Will this mean a higher interest rate?
Not always. Many lenders offering net profit assessments have rates comparable to high street banks.
Conclusion
For company director mortgages, the difference between salary + dividends and salary + net profit can mean the difference between a mortgage offer that falls short and one that actually lets you buy your home.
Charlotte’s case proves the point: the right lender doubled her borrowing power, turning a £135,000 offer into the £240,000 she needed to buy her £270,000 home.
If you’re a company director with strong business profits, remember — the issue isn’t your income, it’s how lenders choose to assess it.
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.