Which lenders offer the most generous retained profits mortgages?

Many successful business owners keep profits inside their limited company rather than drawing everything as salary and dividends. This can be tax-efficient and sensible for cashflow, growth, staffing, stock, investment or future expansion. But it can create a problem when applying for a mortgage.

Some mortgage lenders assess company directors using only salary and dividends. This can understate the true affordability of profitable business owners, especially directors who deliberately leave large sums in the company. Other lenders are more flexible and may consider retained profits, net profit after corporation tax, or the director’s share of company profits when assessing mortgage affordability.

For company owners looking for larger mortgage loans, retained profit mortgages can make a significant difference.

What are retained profits?

Retained profits are the profits left in a limited company after costs, tax, salaries and dividends have been accounted for. Rather than being paid out to shareholders, the money stays in the business.

For mortgage purposes, retained profits can be helpful because they may show the company is generating more income than the director personally withdraws.

A company director may only take £60,000 in salary and dividends, but the business may have generated £250,000 of profit. A lender that only uses salary and dividends could restrict the mortgage size. A lender that considers retained profit or net profit may offer a much larger loan.

Are lenders keen to help self-employed borrowers?

Yes, many lenders are keen to help self-employed borrowers, business owners and limited company directors, but their policies vary significantly.

Some banks and building societies have become much more comfortable with company directors, especially where the business has strong accounts, consistent profits and a clean credit profile. However, not every lender takes the same view.

Some lenders will use salary plus net profit, some will consider retained profit with conditions, some will only consider it by referral, and others will not accept retained profits at all.

This is why advice is so important. The right lender for a PAYE employee may not be the right lender for a business owner.

Lender	Net profit of the company	Retained profit in the company.
Aldermore	Uses the director's salary plus dividend or the salary plus net profit.	Can use the Director's salary, dividend and/OR share of retained profit, plus salary for affordability.
Barclays	Yes.	Yes. Profit after corporation tax may be considered for larger loans, subject to conditions. Residential loan amount must generally be at least £700,000, applicants must collectively own more than 50% of shares, and accounts must cover a minimum three-year trading period.
Darlington	Yes - Directors' remuneration and share of net profit after corporation tax.	Yes - Accounts will be required for the last 2 years.
HSBC	Will consider the applicant's share of net profit after corporation tax averaged over the last 2 years.	We use an average of the last 2 years Net Profit and salary for Ltd companies and average of the last 2 years tax returns for sole traders.
ESBS	Yes.	Yes - only take retained profits from last year.
Hodge	No. Does not use net profit from a limited company for affordability.	Yes. May accept retained profit as income, subject to discussion.
H&R BS	Yes. Salary and net profits are accepted on the Income Flex product range.	Possible by referral on their Income Flex mortgage product.
Virgin Money	Share of net profit after tax plus directors' remuneration will be used. Average of the last 2 years used if profit is increasing or the latest year if it is reduced.	The director's remuneration can be taken into account as income along with their share of profit after tax. If profits are increasing, the average of the director's remuneration and share of profits over the past two years will be used.
The Mortgage Lender	Yes. Uses the share of pre-tax profit plus salary.	Yes. Uses the latest year’s retained pre-tax profit plus salary.
Foundation	Yes.	If payments are stable or increasing the most recent years income can be used. Where payments are variable an average should be used. Retained profits from the prior 2 years may be used.
The Cambridge	Yes, can use the applicant's share of net profit plus salary if they are directors of a ltd company.	Yes - Accounts will be required for last 2 years.

Source: Lender websites and Knowledge Bank

How do retained profit mortgages help company directors?

Retained profit mortgages can help business owners who run a profitable limited company but draw a modest income... They are suitable for those leaving profits in the company for tax planning or future investment, often when they own multiple businesses and have different income streams. Have fluctuating dividends but strong company accounts.

Need a larger mortgage for a family home, London property, prime property or a high-value purchase? Want a lender to look beyond personal drawings and understand the wider company position. Trinity Financial's brokers have access to lenders that issue company director mortgages of £750,000, £1 million, £2 million, or more. They are useful when standard affordability models may not reflect the real strength of the applicant's finances.

Aaron Strutt, Product Director at Trinity Financial, says: “Retained profit mortgages can be extremely useful for business owners who are running profitable companies but do not draw all of the money out of the business. Some lenders are very rigid and only use salary and dividends, but others take a more commercial view and may consider net profit or retained profits. They may want a letter from an approved account to confirm your figures.

“The key is knowing which lender to approach. A strong company director case can look weak if it is sent to the wrong bank, but it can look very attractive to a lender that understands self-employed income. Even if there are fewer lenders taking retained profits, it is still important to assess the market to make sure borrowers secure the most competitively priced rates.”

Do self-employed borrowers need a bigger deposit?

Self-employed borrowers do not automatically need a bigger deposit than employed applicants. Many lenders offer the same loan-to-value products to self-employed borrowers as they do to employed borrowers, provided the income, credit score and affordability fit.

However, the deposit can still make a difference. Borrowers with larger deposits often have access to cheaper rates and may find affordability easier. For complex income cases, a 15%, 20% or 25% deposit can sometimes open up more lender options.

For high-value mortgages, lenders may also have stricter loan-to-value limits, especially above £1 million, £2 million or £5 million.

Are income multiples different for the self-employed?

Self-employed borrowers are often assessed using the same broad affordability framework as employed borrowers, but the income figure used can vary dramatically. This is typically between four and 6.5 times salary.

One lender might use salary and dividends only. Another might use salary plus net profit after corporation tax. Another might use retained profits, subject to an accountant's confirmation. Another might use the latest year if profits are falling, or a two-year average if profits are rising. This means two lenders could produce very different maximum loan amounts for the same business owner. A company director earning £80,000 in salary and dividends but retaining £200,000 in company profit may be treated very differently depending on the lender.

What documents do lenders usually need?

Lenders typically ask for some or all of the following:

• Latest two years’ company accounts.
• SA302s or tax calculations.
• Tax year overviews.
• Accountant’s certificate or accountant’s letter.
• Business bank statements.
• Personal bank statements.
• Confirmation of shareholding.
• Explanation of retained profits and whether they could be withdrawn.
• Evidence that the business remains profitable and sustainable.

Some lenders will use the latest year’s income, while others average the last two years. If profits have fallen, many lenders use the lower recent figure.

Multiple company owners and complex structures

Retained profit mortgage advice becomes even more important where business owners have:

Multiple limited companies. Group or holding company structures. Alphabet shares. Different shareholdings across businesses. Business partners. Director’s loans. Profit retained for expansion or acquisition.

Some lenders exclude group or holding company structures from net profit calculations, while others will consider them by referral. This is where a specialist broker can help package the case properly and approach lenders that understand complex company income.

Why use Trinity Financial for a retained profit mortgage?

Trinity Financial works with high street banks, building societies, specialist lenders and private banks that understand self-employed income.

Our brokers regularly help company directors, shareholders, entrepreneurs, consultants, contractors and business owners secure large residential mortgages, remortgages and additional borrowing.

We can assess which lenders are most likely to use retained profits, net profit or salary plus dividends, then structure the application around the strongest available income figure.

Speak to a Trinity Financial adviser today

The mortgage market moves fast — and the right advice can make a significant difference to the rate and deal you secure. Get in touch with our team to discuss your options.

Call Trinity Financial on 020 7016 0790 to secure a fixed or tracker rate mortgage, book a consultation, or use our appointment calendar

The information contained within was correct at the time of publication but is subject to change. It is for general information purposes and is not advice.

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