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Mortgage lending based on net profit is useful to sole traders, but even more relevant to Limited Company Directors who receive relatively low salary and dividends.

Potentially it is possible to borrow up to 5 times your salary plus share of net profit.  Net profit can be defined as operating profit before corporation tax and before dividends are paid.  For the majority of Limited Company Directors this should increase the amount of money you would otherwise be able to borrow from a mortgage lender.

Some lenders insist that you be a majority shareholder to be able to take advantage of this lending policy, but this is often not the case.

Hence if you prefer not to take much in the way of dividend payments due to wishing to reinvest profits into your business or to remain tax efficient, taking advantage of this approach should help you find the middle ground between mortgage borrowing and opposing objectives.

Note I have seen net profit described as retained profit and shareholder funds – all of these terms are acceptable.


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Austin Degge


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