Retained Profit Mortgage

Podcast approved by The Openwork Partnership on 23/09/2025.

What is a retained profit mortgage and how does it work?

A retained profit mortgage is a mortgage where the lender will use the direct salary that you paid yourself in the business plus the net profit. Even if you haven’t taken it from the business, the net profit within the business is also classed as retained profit for that year.

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

Not all lenders accept this, so if you speak to the wrong lender, the problem we’re going to have is that they’ll want you to look at funds that have actually been taken from the business – your direct salary and dividends.

The problem is that if you’ve taken £50,000 out of the business, but you have a £200,000 net profit retained within the business, you have so much extra income that, in theory, you could draw whenever you’d like.

Some lenders have taken a common-sense point of view and have allowed you to use that net profit because, in theory, you could transfer it over and take it as a dividend whenever you wanted. So, as long as you’ve got the net profit in there and you’ve directed it to a salary, lenders are usually happy with assessing that.

How do lenders assess retained profits when calculating affordability?

This depends on the lender you choose. The direct salary you pay yourself will always be yours. For example, if you paid yourself £12,500 as a direct salary from the business, most lenders would use the average of your last two years’ net profit.

So, if you had £100,000 net profit this year and £200,000 the previous year, they would average those. Most lenders will use £150,000 net profit or retained profit, in addition to the salary you’ve paid yourself.

Having two years’ proof of retained net profit gives you access to more lenders, but having one year isn’t impossible. Some lenders will consider one year’s worth of net profits.

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

No, you do not need an accountant’s certificate to prove retained profits.

Lenders are happy to look at your last two years’ worth of accounts that have been submitted for the business. These will show your net profit after tax. As long as you have two years, or one year depending on the lender, we don’t necessarily need an accountant’s certificate. We can look at the last two years’ worth of fully submitted accounts.

Will all lenders accept retained profits for mortgages?

Not at all. A lot of lenders will want to look at what you’ve actually taken from the business and assess you as a person rather than the business that you own. The problem with that is that you can potentially be offered a substantially lower mortgage in comparison to going to a lender that will assess your net profits.

If you are a limited company director, it’s worth looking at a lender, or speaking to somebody who knows which lenders to consider, that will assess it that way, because it can usually get you a higher borrowing amount.