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Get a Mortgage with Business Retained Profits

  1. Home
  2. Expert Articles
  3. Self Employed Mortgages

If you are a business owner who hasn’t withdrawn all of the profits from your business, but have instead retained these profits within the business and are looking for a mortgage, it can be difficult as some lenders do not look at retained profits with income. 

Generally, high street lenders look at a business owner’s dividend income on top of their salary to calculate their affordability. However, if you have retained profits within the business this could work out at significantly more than your dividend income plus salary, which could mean you could afford to borrow much more.  

Why do lenders work like this?  

Generally, the argument that lenders put forward is that you should only allowed to borrow money based on the money you personally earned, and not the business.  Most high street lenders operate this way, but there are specialist lenders who will look at retained profits as well, which will increase the amount you can borrow.  

An example

If you are a director and 50% shareholder of a limited company with a net profit of £500,000, and you draw a salary of £11,000 per year plus dividends of £40,000 over the last three years, you would be looking at one of two scenarios:  

  • A typical lender would consider your income to be £51,000 per year. Lenders then multiply this figure by four or five times to work out your affordability, so the maximum you will be able to borrow would be £255,000. 

  • A specialist lender would take into account the retained profit within the business, and so your affordability will be based on a minimum of £250,000, which, when multiplied, would mean you could borrow a minimum of £1,000,000! 

For advice on getting a mortgage with retained profits,  contact The Mortgage Hut.

Managing Director Nicola Schutrups
Self Employed Mortgages Expert Article by
Nicola Schutrups (Managing Director)
The Mortgage Hut

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Head office address of The Mortgage Hut
SOUTHAMPTON (HQ)
14 College Place
Southampton
Hampshire
SO15 2FE
Head office phone The Mortgage Hut
023 8098 0304
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info@themortgagehut.net
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The Mortgage Hut Limited is an appointed representative of Mortgage Advice Bureau Limited and Mortgage Advice Bureau (Derby) Limited which are authorised and regulated by the Financial Conduct Authority.

The Mortgage Hut Limited. Registered Office: 14 College Place, Southampton SO15 2FE Registered in England Number: 07629941

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