Self-Employed Net Profit Mortgage
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Self-Employed Net Profit Mortgage
Lee Gathercole and Neezam Romjon explain how using net profit as income works for a mortgage.
Podcast approved by The Openwork Partnership on 11/11/2025.
How do you calculate affordability when using net profit as income?
Using your net profit works differently to using salary and dividends if you’re a limited company director, which most likely you are in this scenario.
A lot of lenders will look at what you draw out of the business as a company director – your salary and dividends. Most of the time they look at that as an average over the last two or three years, but if your latest year is lower, they will just use that.
A few lenders – not as many – look at this differently, and take your net profit as your income. You might be a company director that likes to leave profit in the business unless you need to draw it out. You might therefore not be taking out all of your profit.
When it comes to getting a mortgage, you can be penalised if lenders just look at the income you’re actually taking. Instead, some look at what the business is earning as net profit after tax, based on your shareholding. So, if you’re a 50% shareholder, they’ll take 50% of that net profit for the last two years. They’ll use that as your income in addition to your director’s salary.
How many years of net profit figures do I need to apply for a mortgage?
Most banks will look for two years’, and some three years’. Some lenders might use the latest year, potentially. Most prefer to see a longer period.
Do lenders use the most recent year’s profits or an average over two or more years?
Lenders take different approaches to this. It’s safe to say that the majority look at two years’ average net profit. They’re looking for sustainability of that profit. Is it going up or down? What trends are there?
Certain lenders will just look at the latest year. If you’re a business owner you might have previously had high costs in growing the business, but this year is much healthier because you invested a lot. Your profit was lower in year one, but in year two, you’re starting to reap the rewards.
Certain lenders will just ignore that first year and look at the latest year. That can make the difference between buying a house you’re happy-ish with, or buying the dream home straight away – with a bigger mortgage.
How does my net profit affect the maximum mortgage I can get?
It can make a huge difference. If you like to leave profits within the business, that total might be quite high. But most banks just consider your salary, which might not look very strong.
Some banks, however, look at the net profit figure, and that’s great. It can make a big impact on how much you can borrow. There’s no hard and fast rule around whether they use the latest year or the average – which again can make a difference. That’s where a broker who specialises in this area can particularly help you.
Can I get different income multipliers based on net profit when applying for a mortgage? Do lenders apply a lower income multiple for self-employed applicants?
The income multiplier is how many times your income you’re able to borrow up to. Lenders will often lend between four and 5.5 times your salary as a maximum. You may even get six times your income with some lenders.
The thing that affects income multipliers the most is your deposit. It’s less about whether we’re using net profit, salary and dividends or a sole trader’s net profit. It’s more that the bigger percentage deposit you have, the more the lenders are happy to lend to you.
Lenders don’t reduce the income multipliers for self-employed applicants. They won’t lend more to someone just because they are employed. It’s more to do with the sustainability of the income and the affordability of the mortgage.
Lenders look at your financial commitments, any dependents, how old you are and your credit score. All of those factor into how much you can borrow. High street banks are more competitive, but might be more cautious and lend you less than higher risk or more expensive lenders.
So being self-employed doesn’t affect the income multiplier, but other factors will. A mortgage broker will explain that in detail to you depending on your circumstances.
Can you use projected income to get a mortgage?
Yes, you can use it to support an application. A lender might focus on your projected income if you’ve only been trading for a year and you’re halfway through your second year. They might use a projection for that second year’s income to strengthen the application.
It could be that you’ve been trading for a few years, but your first year was really low. Perhaps you’re two and a half years in, they can see you’re halfway through your third year and it’s looking even stronger. Projected income can support that application, and allow you to borrow more or achieve that loan amount you need.
It’s not a given that you can use projected income. It’s generally used to support an application. In most cases, you need to be partway through a year. They probably wouldn’t use it if the tax year hasn’t started yet. They like to see you start the year or even be six months into it already.
Is there a maximum Loan to Income ratio when using net profit?
No, and it’s the same whether you’re employed or self-employed, using salary and dividends or net profit. Generally the Loan to Income ratio will be the same.
But potentially if you’re able to use more income, you can get a bigger mortgage. It could be the difference between borrowing £400,000 or £500,000 – which translates to a larger or better quality house.
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Are there any minimum income thresholds for self-employed applicants?
Not as such. There are no minimum criteria around salary. As an example, you might be in an employed role, but you have a side hustle selling things online. You might not have a particularly huge income from that – maybe £1,000 a year. But as long as there’s profit there, it can be used to support an application.
One thing to point out is that sometimes business owners take out more money than they earn in profit. That can cause an issue. It’s not quite a minimum threshold, but if you withdraw too much the bank might not like it.
Are there different requirements for sole traders versus limited company directors?
That’s a great question, because there’ll probably be sole traders listening as well as limited company directors. It all comes back to affordability, really.
Lenders are mostly concerned with how you will pay the mortgage, and the income from the business. Most look for at least two or three years in the self-employed role. Then, the business has got past that tricky first year and the lender can make sure it’s sustainable.
If we’re relying on an income from that business to pay your mortgage, we need to make sure the business is going to succeed. That’s why there’s a minimum requirement of two or three years’ trading with most banks.
A few will consider one year, but you’re generally going to be paying more in the interest rate. In terms of the difference between sole traders and limited company directors, how you prove that income is probably the biggest difference.
For a sole trader it’s more straightforward – the banks just look at your net profit from your tax returns for the last two years. What do you declare to HMRC as net profit, and are taxed on after all your expenses have gone out? That’s the figure they use as your income – it’s the equivalent of a salary for affordability.
For a limited company director, they might be looking at tax returns for the last two years based on your salary as a director and the dividends you’ve drawn. But as per the topic of this podcast, they could instead look at the business net profit instead of dividends.
If that’s the case, it means looking at your company accounts rather than your personal tax returns. Lenders look at the business performance, net profit, turnover and trends. Sometimes they want an accountant to give commentary, but that’s less likely for a sole trader.
Again, this is something we would help you understand. We explain what’s required so you can start to prepare for the mortgage application ahead of time.
If I operate under multiple businesses, how do you assess total income?
There are so many variables in assessing businesses, as we’ve demonstrated already.
If you own multiple businesses, lenders look at your role within those and the percentage shareholding you own. That can dictate the level of income they accept, particularly if it’s net profit. If you only own 50% of the business, they might only take 50% of the profit, for example.
They also look at plausibility. As an example, if you’re a plumber full-time, but also you run a restaurant, they might ask how you are going to maintain this level of work long-term.
In short, though, we can use the total income from multiple businesses. I’ve worked with someone who owns multiple GP practices – he doesn’t have a role within each practice, but in managing them overall.
We could use all of the income from the four GP practices as separate businesses to support an application. There’s lots of variables that go into that. Again, plausibility comes into it, as do ownership and role. There’s a lot to consider, and that’s where we come in – to find the right lender to suit your businesses.
How can a mortgage broker help? Have you got anything else you’d like to add?
We’ve covered quite a lot there. As always, a mortgage broker will help you understand what your options look like. What mortgage can you get? What interest rates will be available to you? How much can you borrow and what documents will you need to pull together?
For any client – whether you’re looking to remortgage in the next six months, buy your first home or a next home or a Buy to Let property – start by approaching a broker like us. Have that conversation, and we’ll help you gather all the information you need.
We will approach the lender and get an Agreement in Principle before you find a property and have an offer accepted. That gives you more stability and peace of mind, knowing that you can get the mortgage you need. It also means we can act fast once you have an offer accepted.
A mortgage broker is here to personalise all this information. In a podcast like this we’re always conscious of not being able to give specifics – but that’s because there are so many different options we can help with.
Everyone’s situation is different, so the best thing is to pick up the phone and have a chat to get more tailored answers. We never charge for a discovery call. Worst case, it’s 20 or 30 minutes of your time that will give you clarity on what’s available.
Key Takeaways:
- Some lenders consider a self-employed individual’s net profit as income for mortgage affordability; this can allow for a larger mortgage than relying solely on salary and dividends.
- Most banks require two to three years of net profit figures, while some lenders might consider the latest year, especially if it shows significant growth after initial high costs.
- Being self-employed does not reduce income multipliers for mortgages. Factors like deposit size, financial commitments, dependents, age, and credit score have a greater impact.
- Projected income can be used to support a mortgage application, particularly if the applicant is partway through a strong trading year, but it’s generally not a standalone factor.
- A mortgage broker can help self-employed applicants navigate the complexities of different lenders’ criteria, assess total income from multiple businesses, and personalise information to find suitable mortgage options.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Approved by The Openwork Partnership on 11/11/2025.
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