Retained Profit Mortgage

What is a retained profit mortgage? Is this a particular product?

It’s not necessarily a specific product, but more a unique part of criteria that some lenders allow you to utilise. With a retained profit mortgage, lenders consider the profits that a business has accumulated over time, but have not necessarily been drawn out as income by the business owner. It’s money that the business has, but it’s not been spent.

These profits are retained in the business through growth, investment and other business activity. When applying for a mortgage, self-employed individuals or business owners can use these retained profits along with other income to show they can afford the loan.

The lender assesses the profits to determine whether the applicant can manage the mortgage payments.

If you’re employed and you earn £50,000 a year, that’s simple. That’s all you can borrow against, unless there are other income sources. However, you might be a director taking £30,000 dividends and a salary of £20,000 – but you’ve still got £40,000 in your business.

Some lenders could take £90,000 as your income, which is a huge growth in your affordability.

Am I eligible if I keep profits in my business instead of drawing them as income?

Yes, absolutely, you’ll still be eligible for a mortgage if you keep the profits within the business. That’s how this retained profit criteria works. Many lenders accept retained profits as part of your income assessment for the mortgage, even if you don’t draw them.

However, your eligibility may depend on other specific lender criteria around how long the profits have been retained and how easily they can be accessed.

How do lenders assess retained profits when calculating affordability?

Lenders typically assess retained profits as part of the overall business financials. The net profit is shown in your business accounts, and they look at the amount of retained profit over two or three years, depending on their criteria. They also look at how it impacts the overall financial health of the business.

The lender looks at how much profit is accessible to that person as an individual, considering tax liabilities and any other restrictions.

For instance, if you’ve got two directors of a company who own 50% each, the lender will only allow you to use 50% of that retained profit. It’s about levelling that out and tailoring the mortgage using the lenders that work this way.

Do I need an accountant’s certificate to prove retained profits?

Yes. Most lenders will require official documentation to prove the existence and amount of your retained profits. Usually, that involves your SA100s or your tax returns.

It’s typically in the form of a signed accountant’s certificate, where a professional confirms the information. That will state the financial figures and your ability to access those profits if needed.

Some lenders might also check your business accounts for the past few years to understand how consistent the retained profits have been. They want to be certain it’s not just a fluke. Lenders are focused on being ethical, ensuring you can truly afford the debt they’re allowing you to take on.

Will all lenders accept retained profits for mortgages?

No, not all lenders accept retained profits when calculating affordability. This is bespoke criteria. Identifying those lenders fast is where a broker becomes invaluable – we can target them specifically for better affordability.

Each lender has its own criteria for assessing self-employed borrowers or company directors. Some focus more on salary and dividends than retained profits, via your SA302, for instance. It’s important to find lenders that are open to that. Brokers find the right match to get customers what they need.

Can retained profits be used alongside salary and dividends for affordability?

Yes, retained profits can often be used in conjunction with salary and dividends to calculate the affordability for a mortgage. Again, it’s always subject to the lender’s criteria at the time. But many lenders will combine these different income streams to get a clearer picture of the overall financial situation.

For example, if you’re drawing salary and dividends, but have significant retained profit in the business, these can be factored into the affordability assessment to boost the lending. The lender will be comfortable you can support that mortgage – the money is there, but at the moment you’re not taking it.

Another lender might say no, and just use salary and dividends. They don’t care if you’ve got £100,000 sitting in your business. So the lender’s approach can dramatically change the scope and ability of borrowers, depending on whether they will assess it that way.

How many years of business accounts do I need to show?

Typically, lenders will want to see at least two or three years of business accounts to get an accurate understanding of your income and profitability, to assess how much you can afford to borrow.

Whether they take an average of those, or 100% of the latest year, is specifically down to the lender’s criteria, and depends on their policy at the time we’re looking to apply.

If those retained profits and business performance are consistent over time, it helps. But certain lenders will look at just one year’s tax return to calculate your affordability. That prevents people who have just gone self-employed from becoming mortgage prisoners.

It’s a positive move by the lenders to open up borrowing.

Do lenders look at net profit, gross profit, or both?

This is quite specific to the lender and their criteria. Lenders primarily focus on net profit because this reflects profit after all expenses, taxes and outgoings have been deducted.

Gross profit – or revenue minus the cost of goods sold – is useful in some cases, but it doesn’t give a full picture of financial health. Net profit is the key figure when assessing this because that’s what you’re actually taking.

How does using retained profits affect the Loan to Value I can borrow?

Retained profits can positively influence the Loan to Value ratio, as they increase the total income used to demonstrate affordability.

Higher income can help secure a higher Loan to Value, meaning the client can borrow a larger percentage of the property price. Obviously, though, lenders also consider other factors such as credit history and existing debt when calculating the loan they would go to.

Also, a big part of the Loan to Value comes down to your deposit. Perhaps one lender will allow you to buy something at £250,000 with your deposit, but another lender using your retained profit might allow you to go to £350,000.

You’d have a higher Loan to Value and possibly a higher rate – but it means you could move into that property now, rather than have to buy a smaller home and move again in three or four years.

That saves resale fees and allows you to maximise stamp duty breaks – and saves the hassle of having to move as you outgrow a property. It’s effectively helping you step up on the property ladder sooner.

Are interest rates or fees higher for retained profit mortgages compared to standard self-employed mortgages?

Interest rates or fees are not necessarily higher for these types of mortgages. But as it’s quite a niche bit of criteria, only some lenders allow this. You might not get the top interest rate on the market, because that competitive lender may not allow the use of retained profits.

Some lenders may have specific products for self-employed individuals or business owners, but those are few and far between now. Everything’s open to everybody in today’s market. If a lender perceives additional risk in using retained profits, they might offer slightly higher rates.

So it’s always worth shopping around, comparing the rates and returns. But of the lenders I can think of that can use retained profits, two are in the top five of UK lenders. You’re always going to have a really competitive interest rate. There’s not going to be much difference [information correct at the time of recording in December 2025].

You’ve demonstrated how a mortgage broker can help here – have you got anything else to add?

The core of it is having somebody who can assess your exact priorities and preferences, and look at multiple variables. That can be extremely helpful in securing a mortgage using retained profits.

We’ve got access to a wide range of lenders, and we understand the nuances between different mortgage products. We also guide you through the application process, help gather necessary documentation, and ensure that retained profits are presented in the most advantageous way to the lenders.

We understand which lenders are most likely to accept retained profits and find the optimal one for your specific circumstances. Retained profit mortgages are an excellent option for business owners who want to leverage the money that their business has accumulated, but navigating it can be really complex.

This approach can also help you reap good tax benefits by drawing less salary in the year, and not being penalised.

Key Takeaways:

• Lenders consider a business’s undrawn, retained profits as income to boost mortgage affordability.
• Retained profits can be combined with salary and dividends to demonstrate higher overall income.
• Two to three years of business accounts (focusing on net profit) and a signed accountant’s certificate are required.
• Since not all lenders offer retained profit mortgages, a mortgage broker is essential to find the right one.
• A retained profit mortgage can improve the Loan to Value (LTV) ratio, allowing for a more expensive property sooner, and may offer tax advantages.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.