Getting a mortgage as a limited company director can feel daunting. While high street lenders sometimes make the process seem impossible, the truth is that mortgages for company directors are widely available.
The challenge lies in proving your income and finding the right lender. To apply for a mortgage as a limited company director, you will need to provide documentation such as company accounts, tax returns (SA302 and tax overview), and proof of income, and meet the specific requirements set by lenders.
With proper preparation and guidance from a specialist mortgage broker, business owners can secure competitive mortgage deals.
Introduction to Mortgages
Mortgages for limited company directors can be more complex than for traditional employees, largely due to the unique ways company directors receive their income.
Unlike salaried workers, company directors often have income structures that include a mix of salary, dividends, and retained profits.
This can make it challenging to meet the eligibility criteria set by most lenders, especially high street lenders who may not fully understand the financial realities of running a limited company.
Navigating the mortgage application process as a limited company director requires a clear understanding of how lenders assess income, what documentation is needed, and how interest rates are determined.
Lending criteria can vary significantly between lenders, so it’s essential to work with a specialist mortgage broker who understands the nuances of company director finances.
With expert guidance, limited company directors can present their income in the best possible light, meet lender requirements, and secure a mortgage that fits their needs.
Can Limited Company Directors Get a Mortgage?
Yes, limited company directors can get mortgages, though the application process is more complex than for employed applicants.
Most mortgage lenders, including high street lenders and building societies, now offer mortgage products specifically for company directors, often referred to as company director mortgages.
These products are also available for directors of limited companies and business owners. These lenders assess salary, dividends, and sometimes retained profits when calculating borrowing capacity.
Unlike employed borrowers who show payslips, directors must provide company accounts, tax year overviews, and personal bank statements.
Self employed applicants, including limited company directors, face similar documentation requirements.
Mortgage availability depends on how lenders treat complex income structures, but with the right lender, approval rates are similar to standard applicants.
Key Eligibility Criteria
Eligibility criteria differ between mortgage providers, but most lenders focus on:
- Trading history: Mainstream lenders usually want 2 years of filed company accounts, though some specialist lenders accept 12 months. Limited trading history may still be considered by specialist providers.
- Company accounts: Professionally prepared and signed accounts, showing the company director’s earnings, including salary, dividends, and company profits. A tax year overview is also typically required as supporting documentation.
- Credit history: A good credit history improves your chances of approval and access to better interest rates. Most lenders expect scores above 650.
- Income structure: Assessment is based on the company director’s shareholding and income. Directors with more than 25% ownership are assessed as self employed, while those with smaller shares may be treated as employees.
How Lenders Assess Director Income
The biggest challenge for directors is proving stable income. Most mortgage lenders use one of two methods: Some lenders borrow based on the latest year’s income, while others use an average over several years.
- Salary plus dividends – The standard approach used by high street lenders. Straightforward but may limit borrowing capacity for tax-efficient directors.
- Retained profits method – Specialist providers may lender assess both company profit and retained profit, and some lenders include the company’s profits in their assessment. This often increases maximum loan amounts for directors who don’t extract all earnings as dividends.
When assessing net profit, lenders may adjust for corporation tax and one-off expenses.
Future income projections may also be considered by some specialist lenders. Specialist lenders will consider self employed income, including salary, dividends, and retained profit.
Documentation Requirements
Company directors must provide more evidence than standard applicants. Lenders require:
- Filed company accounts (2–3 years if available, but at minimum should cover at least one year’s trading history)
- SA302s and tax year overviews
- Personal and business bank statements (3–6 months)
- Dividend vouchers and company confirmation statements
- Proof of deposit source
- Accountant’s reference
A complete financial picture helps demonstrate mortgage affordability and smooths the application process.
Using Retained Profits for Your Mortgage
Retained profits are a valuable asset for many company directors, but not all lenders take them into account when assessing mortgage affordability.
While many lenders focus solely on salary and dividends, specialist lenders recognize that retained profits represent genuine, accessible income for business owners.
By including retained profits in their calculations, these specialist lenders can offer company directors a higher borrowing capacity than mainstream options.
To make the most of retained profits, it’s important to work with a specialist mortgage broker who knows how to present your company’s financials effectively.
A broker experienced with company directors can identify lenders who are open to considering retained profits, ensuring your full income is recognised.
This approach can significantly increase your borrowing power and help you secure a mortgage that truly reflects your financial position.
Mortgage Deposit Requirements
How much deposit you need depends on trading history, company performance, and credit history: Deposit requirements may be different if you are seeking a limited company mortgage or applying for a mortgage as a company, as lenders often have specific criteria for these cases.
- 2+ years trading & good credit: 5–10% deposit
- 12–24 months trading: 10–15% deposit
- Limited trading history or bad credit: 25–40% deposit, often with specialist providers
Gift deposits are allowed but must be fully documented. Most lenders will not accept business funds directly as deposits unless extracted legally as salary or dividends.
How Much Can Company Directors Borrow?
Most mortgage lenders allow borrowing of 4.5x annual income, possibly more, but the method of income calculation makes a big difference: The maximum borrowing amount is determined by how lenders borrow based on income, including salary, dividends, and retained profits.
- Salary + dividends: Straightforward but limited
- Salary + retained profits: Higher borrowing capacity with specialist lenders
For example, a director with £20,000 salary and £40,000 dividends might borrow £270,000 (4.5x). If retained profits of £50,000 are included, borrowing capacity could rise to £315,000.
High earners and those with strong trading history may access enhanced multiples of 5.5–6x income through private banks or specialist providers.
Mortgage Calculations: What Can You Afford?
When it comes to determining how much you can borrow, mortgage lenders look at several aspects of your financial situation.
For limited company directors, most lenders will assess a combination of salary, dividends, and net profits to calculate borrowing capacity.
Some specialist lenders may also factor in retained profits, which can boost the maximum loan amount available to you.
Your credit history, business performance, and the way your income is structured all play a role in the final decision.
Working with a specialist mortgage broker is the best way to get an accurate picture of your borrowing capacity and to find the best mortgage deal for your circumstances.
By understanding how different lenders calculate mortgage affordability, company directors can make informed decisions and maximize their chances of securing the maximum loan amount for their needs.
Trading History Considerations
Trading history directly impacts mortgage affordability and product choice: Self employed directors are particularly affected by these requirements, as lenders often scrutinize their trading history to assess eligibility and product options.
- < 12 months: Very limited options, usually specialist lenders only, high deposits, and premium interest rates
- 12–24 months: Some mainstream options, typically with 10–15% deposits
- 2+ years: Full access to mortgage products, best mortgage deals, and standard lending criteria
If you are at the stage of property searching, you might wonder how long an agreement in principle lasts for your mortgage, as this can affect your timeline and application process.
Future income projections, prepared by an accountant, may help directors with limited trading history if supported by contracts or growth evidence.
Special Circumstances
Directors with Bad Credit
Bad credit reduces lender choice but doesn’t rule out mortgages. Specialist brokers can identify lenders willing to work with applicants who have defaults, CCJs, or past bankruptcy. Most cases require larger deposits (25–40%) and careful presentation of credit history.
Companies with Recent Losses
Some lenders reject applications from companies with losses, but specialist lenders may still consider them if recent management accounts show recovery.
Getting a mortgage approved in these circumstances often depends on the lender’s assessment of recent financial improvements. Clear explanations and future income projections are critical.
Changing Business Structure
Directors moving from sole trader to limited company may find some lenders treat this as a new business.
Some lenders have specific policies for limited companies in these situations. Others accept trading continuity. With any self employed mortgage, timing applications and using the right lender is key for smooth approval.
Mortgage Options for Limited Company Directors
Limited company directors have access to a wide range of mortgage products, each designed to suit different financial situations and goals.
Specialist lenders offer tailored mortgage options that take into account factors like retained profits and limited trading history, making them ideal for company directors with complex income structures.
These products can include fixed-rate, variable-rate, and interest-only mortgages, each with their own advantages.
While high street lenders may offer some mortgage products to company directors, their eligibility criteria and interest rates are often less flexible than those of specialist lenders.
By consulting with a specialist mortgage broker, company directors can compare options from both mainstream and specialist providers, ensuring they find the best mortgage deal for their unique circumstances.
Exploring a variety of mortgage products allows directors to secure a mortgage that aligns with their business performance, trading history, and long-term financial goals.
Choosing the Right Mortgage Broker
A specialist mortgage broker can make the difference between rejection and approval. Directors benefit from brokers who:
- Understand retained profits and complex income structures
- Have relationships with specialist lenders
- Can access whole-of-market mortgage availability
Independent mortgage brokers often access exclusive products not available directly. Using an independent mortgage broker is especially beneficial for company directors, as they have broader access to lenders’ products and can tailor solutions to complex income situations. Their expertise helps maximise borrowing capacity and secure the best mortgage deal.
Interest Rates and Mortgage Products
Company directors who meet lending criteria can access the same competitive interest rates as employed borrowers. However, complex mortgage applications may require specialist providers, who can still offer strong deals.
- Fixed rates: Provide predictable mortgage payments, useful for business owners managing cash flow
- Variable rates: Offer flexibility, appealing to those expecting higher future income
- Offset mortgages: Allow savings or retained cash to reduce interest payments, popular for tax efficiency
- Flexible mortgages: Enable overpayments or payment holidays, useful for irregular income
Directors seeking large loans may need private banks, while others may prefer building societies for personal service.
Specialist products like interest-only mortgages are also available for high-value cases with sufficient deposits. Director mortgages are often provided by specialist lenders and mortgage providers who understand complex income structures and can tailor solutions for limited company directors.
Applying for a Mortgage: Step-by-Step Process
Applying for a mortgage as a limited company director involves several key steps, each designed to ensure your application meets lender requirements and maximizes your borrowing potential. Here’s how the process typically unfolds:
- Gather Documentation: Start by collecting all necessary paperwork, including company accounts, tax returns, and personal bank statements. Having these documents ready will streamline the application process.
- Consult a Specialist Mortgage Broker: Work with a specialist mortgage broker who understands the needs of company directors. They will assess your borrowing capacity and help you identify the best mortgage deal for your situation.
- Submit Your Application: Once you’ve chosen a lender, submit your mortgage application along with all required documentation. Your broker will ensure everything is presented clearly and accurately.
- Undergo Assessment: The lender will conduct a credit check and assess your mortgage affordability based on your income, company accounts, and overall financial picture.
- Receive Your Offer: If your application is successful, you’ll receive a mortgage offer. Review the terms carefully with your broker before completing the process.
By following these steps and working closely with a specialist mortgage broker, company directors can navigate the application process with confidence and secure a mortgage that supports their property ambitions.
Conclusion
Securing a company director mortgage is more complex than standard applications, but very achievable with preparation and the right guidance.
Lenders treat directors differently depending on company structure, trading history, and income assessment.
Choosing a specialist broker ensures your mortgage application highlights your strengths and targets the right lenders. With the right strategy, limited company directors can secure mortgage approval, competitive interest rates, and achieve their property goals.
Our mortgage brokers at Alexander Southwell are whole of market advisers and strive to get all directors the best mortgages possible based on their circumstances.
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