How Company Profits Can Help Secure a Self-Employed Mortgage

For self-employed business owners and limited company directors, obtaining a mortgage can be a unique challenge. Unlike traditional employees with a fixed salary, business owners often rely on company profits to demonstrate financial stability.

At Mallard Mortgages we have a proven track record, a team of experts and access to mortgage products to help secure mortgages for those who are self-employed.

Understanding Company Profits and Self-Employed Mortgage Eligibility

When applying for a self-employed mortgage, lenders assess your ability to make repayments. For business owners, this means proving income through company accounts, tax returns, and sometimes additional documentation. The two main ways company profits impact mortgage applications are:

1. Salary and Dividends: Most company directors pay themselves a combination of salary and dividends. Mortgage lenders typically consider both when assessing income.
2. Retained Profits: Some lenders allow business owners to use retained profits (profits kept in the company rather than withdrawn) as evidence of financial strength.

How to Use Company Profits for a Self-Employed Mortgage Application

Salary and Dividend Approach:

Many lenders will base affordability calculations on the director’s salary and any dividends drawn from the company. Typically, they look at the last two to three years of financial records to determine an average income.

Tip: Keeping salary and dividends consistent over the years can help improve mortgage approval chances.

Retained Profits Approach

Some lenders understand that directors often leave profits in the company rather than withdrawing them. If your business is profitable but you take a modest salary, it might be beneficial to seek a lender who also consider retained profits as part of their affordability assessment.

Tip: If your retained profits are substantial, work with a mortgage broker who can find lenders willing to consider them. Mallard Mortgages specialises in helping business owners secure self-employed mortgages by considering all sources of income, including retained profits.

Using Company Accounts and SA302 Forms

Lenders often require:

• Two to three years of company accounts. However, our team have successfully obtained mortgages for clients with only 1 year’s accounts.
• SA302 forms (HMRC tax calculation documents) and tax year overviews.
• Accountant-certified reports if needed.

Tip: Having well-prepared accounts from a qualified accountant can significantly improve your chances. Mallard Mortgages can guide you through this process and ensure you have all the necessary documents in order.

Improving Your Self-Employed Mortgage Prospects

• Work with a Specialist Mortgage Broker: Not all lenders assess business income the same way. A broker like Mallard Mortgages can help find lenders who are more accommodating to self-employed applicants.
• Maintain Good Credit History: A strong credit score boosts approval chances.
• Prepare for Larger Deposits: Some lenders may require a higher deposit from self-employed applicants.
• Show Consistent Income: Avoid sudden fluctuations in salary or dividends.

Mallard Mortgages Can Help

While securing a self-employed mortgage as a business owner can be more complex, company profits (whether withdrawn as dividends or retained in the business) can play a crucial role in demonstrating financial stability. By working with the right lender and preparing thorough financial records, you can improve your chances of getting the mortgage you need.

If you’re a self-employed business owner or company director looking to buy a property, consulting a specialist mortgage broker like Mallard Mortgages can be invaluable in navigating the process and securing the best deal. Contact Mallard Mortgages today to get expert guidance on your self-employed mortgage application.