Company Director Mortgages
If you run your own limited company, the way your income is structured for tax efficiency can lead lenders to significantly understate what you actually earn – unless the right assessment method is used. Understanding how this genuinely works can meaningfully change how much you’re able to borrow.
There’s No Separate “Director Mortgage” Product
It’s worth being clear from the outset: there’s no distinct mortgage product exclusively for limited company directors. You have access to the same range of products – fixed, tracker, and everything in between – as any other applicant. What genuinely differs is how your income is assessed, which is exactly why the right approach to presenting your finances matters so much.
The Shareholding Threshold That Determines How You’re Assessed
Most lenders treat you as self-employed for mortgage purposes if you hold roughly 20-25% or more of your company’s shares. Below that threshold, some lenders will instead assess you as employed, relying more heavily on your PAYE salary alone. This threshold genuinely varies by lender, so it’s worth understanding where you sit before assuming a particular assessment route applies.
The Two Main Ways Lenders Assess Director Income
Understanding this distinction is the single most important thing for any company director to grasp before applying.
Salary Plus Dividends (The Common Default)
Most mainstream lenders assess your income based on salary plus dividends actually drawn from the business, typically shown on your SA302 tax calculations, often averaged across the last two years. This is the traditional, most widely available approach, but it only reflects money you’ve personally taken out of the company – not what the business actually earned.
Salary Plus Share of Net Company Profit
A smaller group of more specialist lenders will instead assess your salary alongside your proportional share of the company’s net profit, including profit retained within the business rather than paid out as dividends. This route can recognise considerably more of your genuine earning power, particularly if your accountant has sensibly advised keeping profit in the company for tax efficiency rather than drawing it all out.
Why the Gap Between These Two Methods Can Be Substantial
Many directors are advised, quite reasonably, to take a modest salary and moderate dividends, leaving a meaningful portion of profit retained within the business rather than drawn out and taxed further. Assessed purely on salary and dividends, this can significantly understate your true financial position; assessed on salary plus your share of retained profit, the picture can look considerably stronger.
Illustrative Example
Consider a director taking a £15,000 salary and £25,000 in dividends, giving a declared personal income of £40,000. If the company retained a further £30,000 in profit that year, a lender using the salary-plus-profit method might assess income closer to £70,000 instead – a genuinely substantial difference in borrowing power, driven entirely by which assessment method is used rather than any change in your actual financial strength.
Why a Credible Story Matters for Retained Profit
Lenders willing to consider retained profit generally want to understand why it’s being kept in the business and whether that pattern is genuinely sustainable, rather than the result of a single unusually strong year. Consistent, ongoing retained profit is viewed far more favourably than a one-off spike from an exceptional project or contract that isn’t representative of your normal trading.
Documentation You’ll Need
A typical application requires two to three years of certified company accounts, SA302 tax calculations with corresponding tax year overviews, and three months of both personal and company bank statements. Some more flexible lenders will accept as little as one year of accounts, working from your most recent year rather than a multi-year average, though this narrows your realistic lender options somewhat.
Trading History Requirements
Most lenders want to see two to three years of trading history before considering an application, though a smaller number of specialist lenders will work with as little as twelve months, particularly where you have a genuine track record in the same industry beforehand. If you recently converted from a sole trader to a limited company, it’s worth being clear with your broker about this, since some lenders will want to understand your trading history both before and after incorporation, particularly where it’s genuinely the same underlying business continuing under a new structure.
Income Multiples
Once your income is properly assessed, most lenders apply a multiple of around 4-4.5 times that figure, with some stretching to 5 or 6 times for particularly strong applications. It’s worth understanding that this multiple is applied to whichever income figure your specific lender uses – which is exactly why the assessment method matters as much as the multiple itself.
Deposit Requirements
Deposits from as little as 5% are available for many director applicants, though larger loans – commonly above £500,000 – often require a minimum of 10% regardless of how strong your income position is. A larger deposit generally widens your choice of lenders and improves the rates available to you.
Director’s Loans: A Specific Point Worth Understanding
If you’ve lent money to your own company and it’s being repaid to you, this repayment isn’t treated as income for mortgage purposes, since it’s simply the return of your own capital. However, if you charge your company interest on that loan, the interest payments themselves are generally treated as income – a genuinely specific point worth flagging to your broker if this applies to your situation.
Why This Is a Genuine Decision, Not a Formality
It’s worth being clear-eyed that a mortgage assessed against your business income, in whatever form, is still borrowing secured against your home. If your business doesn’t perform as expected in future, your property remains at risk in exactly the same way as any other mortgage – worth weighing this properly rather than treating the application process as purely a documentation exercise.
Working With Your Accountant vs Your Broker
Your accountant’s advice to structure income tax-efficiently is entirely sensible and correct from a tax perspective, but it can work against you if a lender only assesses drawn income rather than your genuine earning power. It’s worth involving your broker early, ideally before your financial year-end, so income and dividends can be structured with both tax efficiency and your mortgage plans genuinely in mind.
If You Also Have Adverse Credit or Complex Circumstances
A less-than-perfect credit history doesn’t automatically rule out a director mortgage application. Our Adverse Credit Mortgages page covers how lenders assess credit history more broadly alongside complex income.
Frequently Asked Questions
Is there a special mortgage product for limited company directors?
No – you have access to the same products as any other applicant; what differs is how your income is assessed.
How much shareholding do I need to be assessed as self-employed?
Most lenders use a threshold of around 20-25%, though this varies by lender – below this, you may be assessed more as an employed applicant.
Can lenders consider profit I’ve left in my company rather than drawn as dividends?
Yes, a smaller group of more specialist lenders will assess salary plus your share of retained net profit, which can recognise considerably more of your genuine income.
How many years of accounts do I need?
Most lenders want two to three years, though some more flexible lenders will accept as little as one year, particularly with a strong same-industry background.
Are director’s loan repayments treated as income?
No – repayment of a loan you made to your own company is treated as return of capital, not income, though interest you charge on that loan generally is treated as income.
Get in touch with details of your company accounts and how your income is structured, and we’ll help you find a lender genuinely equipped to assess your full earning power.
