Lenders calculate director income differently - some use salary only, others include dividends, and specialists may use net profit or retained earnings. The right lender choice can mean £100,000+ difference in borrowing capacity. Understanding which calculation method suits your accounts is crucial.
- Income calculation methods vary significantly between lenders
- Salary plus dividends is the most common mainstream approach
- Specialist lenders may use net profit for higher borrowing
- Shareholding percentage may affect income calculations
- Retained profits can be used by some specialist lenders
- Accountant-certified projections accepted by some lenders
| Lender Type | Accepts | Notes |
|---|---|---|
| High Street - Basic | Salary only | Very restrictive for tax-efficient directors |
| High Street - Better | Salary + dividends | Average of last 2-3 years |
| Building Societies | Salary + dividends | May use latest year if increasing |
| Specialist Lenders | Net profit or salary + dividends | Whichever is higher |
| Private Banks | Net profit + retained | Maximum flexibility, higher min loan |
Understanding Lender Criteria for Your Situation
Every mortgage lender has unique criteria for assessing applications. What appears as a rejection from one lender could be an approval from another—the key is finding lenders whose policies match your circumstances. This is particularly important when you have non-standard elements in your application.
Lenders assess applications based on multiple factors including credit history, income stability, employment type, deposit size, and the property itself. They apply these criteria differently, with some being more flexible on certain aspects while stricter on others. Understanding these differences is crucial for finding the right lender.
Our criteria database shows you which lenders are most likely to approve applications like yours. Rather than applying blindly and risking credit score damage from rejections, you can target lenders whose policies specifically accommodate your situation. This targeted approach significantly improves your chances of approval.
Frequently Asked Questions
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