When seeking a mortgage, Limited Company Directors may explore the option of using profits rather than dividends to assess affordability. This can be advantageous, especially as many directors opt for smaller dividends, preferring to retain profits within the business.

Why consider using profits over dividends?

Some lenders exclusively consider dividends when assessing mortgage affordability, disregarding the fact that retained profits belong to the director. This approach might lead to a situation where the available mortgage amount falls short of requirements, despite adequate income being present. In some cases, directors have been advised to take unnecessary dividends solely to meet mortgage criteria. However, such a strategy not only risks disapproval from the lender but may also contradict accounting advice.