Retained Profit Mortgages
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Retained Profit Mortgages
Paul Holland breaks down how retained profit can be used for a mortgage. Episode recorded in October 2025.
What is a retained profit mortgage, and how does it work?
A retained profit mortgage is designed for company directors. Limited company owners often choose not to withdraw their entire net profit as salary, dividends, or drawings.
When assessing affordability, a lender that considers retained profits will examine the amount of money held within the business, specifically in capital reserves. This can then be used to determine your borrowing power and potential.
For business owners who prefer to retain profits within their company rather than drawing them as personal income, certain lenders consider this retained profit when assessing mortgage affordability. While not a standalone mortgage product, it’s an option offered by specific lenders.
Am I eligible if I keep profits in my business instead of drawing them as income?
Yes. That’s exactly who this type of mortgage approach is for. If you’re a limited company director and you’ve kept profits in your business instead of taking them out as personal income (and getting taxed on them), some lenders might actually look at those profits when they’re figuring out your income and what you can afford for a mortgage.
How do lenders assess retained profits when calculating affordability?
For many company directors, it’s common to take a salary and then top it up with dividends. While most lenders look at the total of these two when figuring out what you can afford, a retained profit mortgage also considers the money that’s still in your business, on top of what you’ve personally taken out. This can really open doors for lenders to increase how much you can borrow.
Do I need an accountant certificate to prove retained profits?
Most of the time, yes. Lenders are usually going to want your accounts to be signed off. If you’re a limited company, they’re realistically going to need to be signed off by an accountant that’s got certain qualifications. It is much more difficult to get signed off as a limited company if you’ve done your own accounts.
It’s a good idea to get a qualified accountant involved. Some lenders might want more than just the numbers; they could ask for financial projections or explanations about retained earnings and why that money hasn’t been taken out. You’ll often find they will ask for an accountant’s certificate.
Will all lenders accept retained profits for mortgages?
No. Only a handful will actually look to implement any retained profits within the business. Most lenders are going to stick to that salary and dividend approach mentioned earlier.
If you’re looking at anything like that from a self-employed or limited company perspective, it’s a good idea to employ a specialist broker. Straight away, I could probably list a handful of lenders that I know would fit the bill if anybody’s looking to approach it with a retained profit perspective.
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Can retained profits be used alongside salary and dividends for affordability?
Yes. A lot of people might think that because they’re looking at retained profits, the lenders would look at the net profit aspect of their business. But there are people out there who would look at your salary and dividends, and combine that with the retained profits in the business.
It might not necessarily give you as much as it would if a lender looked at the net profit and the retained profit, but it’s another approach. Each lender will have their own criteria in the background that determines which way they’re going to do that.
How many years of business accounts do I need to show?
Most lenders are going to ask for two years when it comes to any self-employment. A few might consider one. But because you’re looking at a smaller list of lenders straight away, then you’re adding in the need to look at retained profits, it might leave you with an even smaller pool of lenders at the end of that.
To conclude, you’re in a strong position for two years. Some lenders might even ask for three, but you can achieve it with one.
Do lenders look at net profit, gross profit, or both?
They’re more interested in the net profit. That’s really the bit after expenses, after taxes. That’s what realistically you could draw down as a director with a limited company. So that’s really what they’re going to be looking to assess your affordability with, and combining that with your expenditure.
How does using retained profits affect the Loan to Value (LTV) I can borrow?
Using retained profits doesn’t change the Loan to Value (LTV) limits; these will be set by other things. They are usually the same across the board, regardless of whether or not it’s retained profits or not.
You’re working with a smaller pool of lenders to begin with, but it’s not out of the question to get up to 95% on a retained profit approach, looking at a mortgage. Although if you do look at the retained profits, and that is something that the lender is willing to add in, that’s going to have a positive impact on the maximum loan size – allowing you to borrow more at 95%.
Are the interest rates or fees higher for retained profit mortgages compared to standard self-employed mortgages?
Not usually, no. Rates are broadly going to be the same. The difference is, as we have mentioned previously, you’re working with a smaller pool of lenders.
Therefore, you may not secure the most competitive market rate, as the lender might not specialise in retained profit mortgages. That’s what you need to be aware of.
How can a mortgage broker help here? Is there anything else you’d like to add?
When you’re looking for a retained profit mortgage, you’ll find your lender choices are a bit more limited. However, working with a broker can be a real plus. Sometimes, a lender who doesn’t focus on retained profits but offers a better multiple of your total income might actually give you a bigger loan with a better interest rate than a lender who specialises in retained profit mortgages.
Meeting lending criteria isn’t always straightforward; it’s rarely a simple case of ticking boxes. It’s a case of taking everything into account – rates, affordability, lenders’ timescales, and the complexity of completing an application – and coming up with the most suitable option that you can achieve. It’s really about the bigger picture.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
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