Self-Employed Net Profit Mortgage
Your new home or investment property is just a mortgage application away. And with our expertise and tenacity, that property dream is closer than you think.
Get in touch for a no-obligation chat about how we might be able to help you.
What's On This Page?
Get In Touch
Self-Employed Net Profit Mortgage
James Best explains how using net profit as your income works, if you are self-employed and applying for a mortgage.
How do you calculate affordability when using net profit as income?
The information is usually taken from the company accounts or your self-assessments from HMRC.
On the accounts it may show as net profit, whereas on your self-assessment tax calculations, it will be shown as income from self-employment. That is generally the figure that’s used for mortgages.
How many years of net profit figures do I need to apply for a mortgage?
This is probably the most common question we’re asked as brokers. On average, most lenders want two years to establish a track record. More conservative lenders may want three years’ trading figures, as that gives them a better understanding of the average profit levels within a business.
However, some lenders can consider one year’s worth of net profit figures under the right circumstances. With so much variety around what lenders can and can’t do, I always suggest speaking to an expert to point you in the right direction.
Do lenders use the average net profit for the most recent year, or over two or more years?
On the whole, most lenders look at an average or the latest year’s net profit figures, whichever is lower. That’s the most conservative approach, giving them a worst case scenario.
However, some lenders may consider the latest year if there’s been an improvement. Perhaps you have been trading for two years but the first year was as a startup, so your profits were lower. You’ve invested in the business and it’s been building, so your most recent year is a lot better.
In those circumstances, lenders may accept the most recent year’s figures. Also, with businesses that have seen a continuous upward trend over a number of years, lenders may also consider the most recent year.
How does my net profit affect the maximum mortgage I can get?
Net profit is viewed in the same way as an employed person’s gross annual basic salary.
Those figures are used to calculate the borrowing maximum with each lender.
The higher your net profit figures, or the higher a salary, the more you can afford in mortgage payments. Ergo, the higher the loan amount you could potentially be accepted for.
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?
Aside from a few bespoke schemes, the income multiples lenders use for affordability is pretty much the same for the self-employed as for the employed.
If those two figures are the same, i.e. the net profit is the same as the gross salary, we would expect a lender to offer the same borrowing amount. Self-employed clients aren’t penalised with lower income multiples.
Often because of how income can be viewed, you can benefit as a limited company director. For example, you could potentially borrow more if you take dividends compared to a sole trader or someone who’s employed. That’s because of the way dividends are treated for tax purposes [correct at the time of recording in May 2025].
Some mortgage lenders can potentially lend you more if your income is solely taken from dividend income compared to net profit or a salary. So there are some variances in certain niches.
Speak To an Expert
Come on in and be quite forward with what you’re after – just be very honest with your mortgage broker. It’s good to make sure that we know absolutely everything about you. That way we can’t be blindsided by a lender. An open book policy is very good when coming to see your mortgage broker.
Can you use projected income to get a mortgage?
The income on a projection from your accountant will not be used to work out affordability.
However, projections can be very useful to underwriters as an indication of whether business profits will continue in a similar way.
If profit and turnover are at a similar level, or they’ve increased recently, there’s stability – which can be very useful.
For example, we might have a self-employed client with just one year’s books, and the underwriter wants a snapshot for what the next year is going to look like. It gives them extra peace of mind.
Or, perhaps profits have gone up over the last few years. An underwriter might just want an accountant to confirm that the business is moving in the right direction so they can use that higher figure.
Projections can be very useful in the right circumstances, but you won’t necessarily be able to use the specific numbers if a potentially big year profit-wise hasn’t finished yet.
Is there a maximum Loan to Income or LTI ratio when using net profit?
They’re the same as for the employed, other than a few specialist schemes for employed clients only. So the good news there is there’s no difference when using net profit.
However, if you run a limited company or you’re a contractor – and we’ve done podcasts for those – there are different ways income can be interpreted. We may be able to use your income in a better way in those circumstances.
Are there any minimum income thresholds for self-employed applicants?
Most lenders rely on affordability to assess loans, so it’s more to do with what the income is and your expenditure. Most lenders don’t have a minimum level.
Living costs need to be included in affordability, because obviously lenders want to be responsible and make sure you can afford not only the mortgage, but also your household bills and utilities.
Each lender will have a bottom line – if your income is below a certain amount, you wouldn’t be able to get a mortgage at all. But it isn’t at a set level, because that can vary depending on what things cost, essentially.
Are there different requirements for sole traders versus limited company directors?
To get the best options, we need to get all the information. My top tip is to give your broker or financial advisor all the details available about your business.
If you can, give them your accounts and your self-assessments, because having the whole picture lets me see how your circumstances will be interpreted with each lender.
All mortgage companies look at self assessments, whether you’re a sole trader or a limited company. Some lenders look at net profit if you are a limited company director, plus salary. Sometimes that’s before or after tax, which can be vastly different depending on your turnover.
Sometimes they look at the director’s salary and dividends. Understanding the whole picture can really help brokers find you the right mortgage. I’ve seen some wildly different circumstances, where clients have been given a borrowing figure by one bank, but they want to see if they could borrow more.
By looking at the company accounts and understanding the circumstances as a whole, we’ve been able to recommend something totally different and more beneficial.
If I operate under multiple businesses, how do you assess total income?
Again, I would get all the information. I would look at all of the accounts for the businesses separately to see what the shareholding is, what income is drawn and the profits for each business – then I would total all of those up.
However, usually your personal self-assessment would show all the income you have taken and paid tax on from all of your multiple businesses.
If you draw everything out of the business, or they’re all sole trader businesses and the income is pretty much the same, your self-assessment should be handy income proof, with everything all in one place.
How can a mortgage broker help here? Have you got anything else you’d like to add?
Mortgage professionals can really shine when dealing with the self-employed – and this is my favorite type of client. I love digging into the detail and helping self-employed clients with their mortgage needs.
A number of times I’ve helped clients who thought they can’t get a mortgage – after a knockback from their bank or another broker giving them disappointing news. Perhaps they didn’t understand how to interpret the figures in the best possible way, but we’ve turned that situation into a positive.
We’re experts in the field. So speak to a knowledgeable professional, even if you’re not sure you can go ahead. The worst possible outcome is that we say it’s not the right time for you.
But I make it clear what you need to do and when to get back in touch. You’ve then got a to-do list to work through – and soon it will be a completely different story.
If you use a good accountant, get them in the loop as well. They help make sure the business works in the best possible way, so us working together in looking at mortgages is really useful. Accountants can very often help with verifying information if the underwriters need that.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
For specialist tax advice, please refer to an accountant or tax specialist.