Can I Get a Mortgage Using Company Profits Rather Than Drawings?

Hi Alan,

I’m pleased to say we get these types of enquiries every day, so we can help!

As you’ve found by looking around already, the majority of lenders look at just salary and dividend income when assessing your borrowing capacity, and most advisors don’t understand how to read accounts properly to assess whether your business is viable and healthy.

In your case, most lenders would view your total annual income as £8,000 Salary + £66,000 dividend = £74,000 (providing your previous years’ figures are similar – if not, they will likely take an average of the last 2 or 3 years, which can reduce the income figure they use). Every lender is different with their income calculations and maximum loan sizes, but if they use a generous 4.5x income multiplier, that’s a maximum loan of £333,000.

However, if we look at lenders who are more accommodating of your situation, it is possible to borrow based on the net profit and salary of the business (your retained profits). In your case, providing you own 100% of the business, this would work out as £8,000 salary + £120,000 net profit = £128,000 total income. If you own less of the business, then it’s calculated based on your share of the profits.

The same 4.5x income multiple then gives us a maximum loan of £576,000, which is a massive increase in borrowing capacity.

We’ve written an article on using retained profits, so feel free to read it. If you’re ready to put together an application, then make an enquiry, and one of the experts will get it approved for you!

Cheers,

Pete