Mortgages for limited company directors

If you run your own limited company, your income can look more complicated on paper than it feels in real life. I'm Penny, and here I'll explain, in plain English, how lenders tend to view director income and what usually helps, so you walk into the conversation knowing what's what.

Why being a director changes the picture

When you're employed on a simple salary, a lender can read your income off a payslip in seconds. As a limited company director, your money usually comes through in more than one way, and how a lender counts it can make a real difference to what you're able to borrow.

Most directors draw a modest salary and top it up with dividends (a share of the company's profit paid to shareholders). Many people arrange this way for tax reasons. The catch is that a low salary plus dividends can make your income look smaller than the value you actually take out of the business, and different lenders handle that very differently.

There's no single rulebook here. One lender might only count your salary and dividends; another might take a broader view. That's why two lenders can look at the exact same director and reach quite different figures.

How lenders tend to work out your income

Broadly, there are two common approaches, and it helps to know both exist:

• Salary plus dividends — the lender adds the salary you pay yourself to the dividends you draw. This is the most widely used method.
• Salary plus your share of retained profit — some lenders will instead consider your salary alongside your portion of the profit the company has kept in the business (rather than only what you've drawn out). For a director who leaves profit in the company, this can paint a fuller picture.

Lenders also commonly size borrowing against income using a multiple — as a rough, general guide often in the region of 4 to 4.5 times income, though this varies by lender and circumstances and isn't a promise. On deposits, many residential lenders look for something in the region of 5% to 10% of the property value as a starting point, with more choice and often better terms as the deposit grows.

I'm describing general market norms here, not a quote or a personal calculation. The right figures for your situation depend on your accounts, the lender, and the full detail, which is exactly the sort of thing a qualified adviser is there to work through.

What you'll usually need to show

Lenders want to see a picture of a stable, evidenced income. As a director, that typically means gathering a bit more paperwork than an employed applicant would. Commonly requested items include:

• Company accounts — often finalised accounts covering a trading track record. Many lenders like to see a couple of years, though some will consider a shorter history depending on the situation.
• SA302s and tax year overviews — your personal tax calculations from HMRC, which show salary and dividends.
• Business and personal bank statements — usually covering recent months.
• Details of your shareholding and your role in the company.

A quick word on timing: it usually pays to have your latest accounts and tax paperwork tidy and to hand before you apply, as gaps or out-of-date figures are a common reason things slow down.

Things that commonly help — and common myths

A few themes come up again and again with director applications:

• Consistency reads well. Income that's steady or growing across your accounts tends to be more straightforward than income that swings sharply year to year.
• The lender matters as much as the numbers. Because lenders assess director income so differently, the same application can land very differently depending on where it goes.
• Retained profit isn't automatically ignored. A widespread myth is that only drawn dividends count. Some lenders will consider retained profit, which can matter a lot if you deliberately leave money in the business.
• A low salary isn't a dead end. Paying yourself modestly for tax efficiency is normal and understood; it just makes choosing the right lender and evidencing your full income more important.

None of this guarantees an outcome. It's simply the groundwork that tends to make the conversation smoother.

Going direct to a bank vs using a whole-of-market adviser

You can absolutely approach a bank directly, and for some people that's perfectly comfortable. It's worth understanding the trade-off, though.

Going direct means dealing with one lender's products, on that lender's view of director income. If their way of counting suits you, great. If it doesn't, you may not find that out until later, and you'd need to start again elsewhere.

A whole-of-market adviser can look across many lenders and match your particular income shape to those most likely to assess it favourably, which can save legwork when your income isn't a simple salary. The trade-off is that you're bringing a third party into the process. For self-employed and director income, many people find that specialist knowledge genuinely useful, but the right choice depends on you.

Either way, no one can promise a specific lender will accept you or lend a particular amount. What a good adviser offers is a wider search and a considered match, not a guarantee.

Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured against it. This guide is general information, not advice.