Business owners can sometimes find it difficult to get a mortgage. But lenders are increasingly open to offering mortgages to both the self-employed and company owners
With around 5.6 million small businesses in the UK at the start of 2023 (2.2 million more than in 2000) lenders are generally happy to offer mortgages to business owners – provided you can reassure them that you are a good risk. Specialist lenders may be able to help if you don't meet the requirements of more mainstream mortgage providers such as the high street banks.
Mortgages for the self-employed
If you are self-employed, how much you can borrow depends on how large a deposit you can provide and what your income is. Lenders usually consider your net, after-tax profits as your income. Lenders typically prefer to lend to people with relatively steady or consistently increasing income.
Most lenders will want to see two to three years of tax returns as evidence of this, and may also want copies of business accounts which have been checked by an accountant. You may find it difficult to get a mortgage if you have only recently started your business, but there are lenders who will accept just a single year's accounts.
'Self-certification' mortgages – where the self-employed could state their income without needing to prove it – are no longer available.
More broadly, lenders look to check that the mortgage will be affordable. So lenders may also want to see your recent bank statements, to get a picture of your main personal and business expenses.
Mortgages for company directors
If your business trades as a company, you may well take your income as a combination of salary and dividends. Lenders generally take both of these into account in terms of how large a mortgage they might offer you.
However, many lenders will not take into account any profits you retain in the business – for example, to fund future growth or as part of your tax planning. If the amount you want to borrow relies on these retained profits, you may need to turn to a specialist lender for your mortgage.
Help finding a mortgage as a business owner
Like any borrower, it's worth shopping around to find what mortgages are available for your particular circumstances. You can do this yourself or get advice from a mortgage broker. A broker can be particularly helpful if:
- you have a poor credit rating, limited credit history or record of bad debts
- your business is a new start-up, or has recently changed form (for example, from being self-employed to trading as a company)
- your earnings are volatile, or you have made an annual loss within the last few years
- you want to borrow a large amount
- profits have grown significantly and you want a mortgage based on your latest annual profits (rather than average profits over the last few years)