Can you get a mortgage using dividends?
Yes – Many mortgage lenders will accept dividend income as part of your mortgage application.
If you are a company director paid through salary and dividends, lenders will usually assess both forms of income together. However, every lender assesses this differently, which is why choosing the right lender is essential.
Not sure how lenders will assess your dividend income?
Company directors are often assessed differently to employed applicants, and using the wrong lender can reduce how much you can borrow.
At Kerr & Watson, we help company directors structure applications correctly and match them with lenders who understand dividend income.
What is dividend income for a mortgage?
Dividend income is a share of your company’s profits that you take as a shareholder. For many directors, dividends form a significant part of total earnings alongside a base salary. They’re not subject to national insurance contributions, making them a tax-efficient way to pay yourself.
Directors often set their salary at or below the basic tax rate threshold and take the rest as dividends. This is perfectly legitimate and common among business owners, but it does mean your payslips may not tell the full story of your income, which is why some lenders take a more cautious approach when assessing company directors.
How lenders view dividend income
The way dividend income is treated varies from one mortgage provider to another. Some lenders will happily take both salary and dividends into account in full when calculating what you can borrow. Others may only consider salary, or they may take salary plus net profit from the business rather than dividends.
Many lenders will average your income over the last two years. If your income is stable or increasing, they might use the average figure. If it’s decreasing, they are likely to use the most recent year’s income, which can reduce your borrowing power. Some will even use just the one year of trading if you only have this amount of history.
Specialist lenders may be more flexible in how they assess company directors. A mortgage broker like Kerr & Watson can help match you with lenders who are most likely to recognise your full earning potential.
Do lenders use salary plus dividends or company profits?
Different lenders assess company director income in different ways.
Some lenders use:
- Salary plus dividends
Others may use:
- Salary plus net profit
- Salary plus retained profit
This can significantly affect how much you can borrow.
If you retain profits within your company for growth or tax planning purposes, certain lenders may still include these profits when assessing affordability.
Documents you’ll need
When applying for a mortgage using dividends, you can expect to provide a range of documents to show both your personal income and the financial health of your business. These typically include:
- SA302 tax calculations for the last two or three years
- Tax Year Overviews from HMRC for the same period
- Full company accounts, prepared by a qualified accountant
- Business bank statements (usually the last three to six months)
- Personal bank statements to confirm income and spending patterns
Having up-to-date and well-presented records is key. It reassures lenders that your income is sustainable and that your business is well-managed.
How long you should have been taking dividends
Most lenders prefer to see at least two years of dividend income to include it in your mortgage assessment. Some may work with just one year if you can provide strong evidence, such as solid company accounts or previous experience in the same industry.
If you have less than two years of accounts, your mortgage options may be more limited, but a broker can help identify lenders willing to consider shorter trading histories.
Can you get a mortgage with one year of dividends?
Yes — some lenders will consider applicants with only one year of dividend history.
This usually depends on:
- Your industry experience
- The strength of your latest accounts
- Previous employed history
- Deposit size and credit profile
However, lender options are usually broader once you have two years of accounts available.
Find out Your Options
Using retained profits to boost borrowing power
If you take a low salary and modest dividends but your company retains significant profits, some lenders will consider salary plus net profit instead of salary plus dividends. This can make a big difference to how much you can borrow, especially if you’ve kept money in the business for growth or tax planning reasons.
For example, if you draw £20,000 in salary and dividends but your company retains £80,000 in profit, certain lenders may assess your income as £100,000 rather than just £20,000.
Why retained profits matter for company directors
Many company directors leave profits within the business for tax efficiency or future growth.
Some lenders understand this and may assess your affordability using retained profits rather than just the income drawn personally.
This can significantly increase borrowing potential for directors who deliberately keep personal drawings low.
Other income that may be considered
In addition to salary and dividends, lenders may also consider:
- Rental income from property investments
- Bonuses or commissions
- Investment income from shares or savings
- Child maintenance payments
- Certain benefits or allowances, depending on the lender
Including all eligible income can help improve your affordability assessment.
How much can you borrow using dividends?
Most lenders use income multiples when assessing affordability.
Typically, borrowing ranges from:
- 4 to 5 times annual income
- Potentially higher for strong applications
The amount available depends on:
- Salary and dividend structure
- Company profits
- Existing commitments
- Deposit size
- Credit history
- The lender’s assessment model
What deposit do you need?
Most lenders require:
- At least 5% deposit for residential mortgages
- Larger deposits for complex cases or adverse credit
- A larger deposit can:
- Increase lender choice
- Improve borrowing potential
- Help access better mortgage rates
How to maximise your chances of approval
When you’re applying for a mortgage using dividends, preparation makes a big difference. Here are some practical steps you can take:
- Keep your accounts and tax returns up to date, ideally prepared by an accountant
- Show consistent or increasing income over the last two or three years
- Maintain a strong credit score by paying bills on time and managing debt
- Work with a broker who understands how to present your income to lenders effectively
At Kerr & Watson, we regularly help company directors position their applications and can help guide you on the necessary documents to gather for your case, speaking with your accountant if needed.
What if you have bad credit?
It can still be possible to get a mortgage as a company director with bad credit, but you may face higher interest rates, need a larger deposit, or be asked for more detailed documentation. Some specialist lenders are more open to applicants with past credit issues, especially if your business finances are strong.
A broker can help you identify these lenders and manage the application to increase your chances of approval.
Why work with Kerr & Watson?
Not all lenders take the same approach to dividend income, which is why going directly to your bank might not get you the best result. At Kerr & Watson, we:
- Understand the unique challenges company directors face when applying for a mortgage
- Have access to lenders who take a more flexible view of income, including retained profits
- Save you time by identifying the most suitable lenders before you apply
- Can sometimes access exclusive rates and products not available directly to borrowers
Our goal is to secure a mortgage that reflects your true earning power and maximises your borrowing potential where appropriate.
Frequently asked questions about mortgages using dividends
Do mortgage lenders accept dividend income?
Yes — many lenders accept dividend income alongside salary for company directors.
Can retained profits be used for a mortgage?
Some lenders will consider retained profits when assessing affordability, particularly for limited company directors.
How many years of dividends do lenders need?
Most lenders prefer two years of accounts, although some may accept one year.
Can I get a mortgage with low salary but high dividends?
Yes — many company directors use a low salary and higher dividends for tax efficiency, and lenders are familiar with this structure.
Can I get a mortgage if I leave profits in my company?
Yes — some lenders will assess retained company profits alongside salary and dividends when calculating affordability.
Conclusion
Getting a mortgage using dividends is entirely possible, but the outcome depends on approaching the right lender with the right evidence. By preparing your accounts, understanding how different lenders assess income, and working with a broker who knows the market, you can significantly improve your chances of success.
If you’re a company director looking to buy, remortgage, or invest, Kerr & Watson can guide you through the process from start to finish. We’ll make sure your application shows your income in the best light and matches you with a lender who values your full earnings.
Need help getting a mortgage as a company director?
At Kerr & Watson, we help business owners secure mortgages that reflect their true earning power, not just their basic salary.
We’ll help you structure your application correctly, maximise your borrowing potential, and match you with lenders who understand dividend income.
Speak to Kerr & Watson today to understand how lenders could assess your dividend income and maximise your mortgage options.
