Mortgages for Startup Founders: Securing Property with Complex Income
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Is a Specialist Founder Mortgage Suitable for You?
This approach is essential for any entrepreneur whose personal tax return does not reflect their true wealth or the success of their business.
Who Benefits from Specialist Founder Mortgages?
If your company has recently raised significant capital (Seed, Series A, etc.), but you are still drawing a modest salary, specialist lenders can factor the company’s valuation and cash position into their assessment.
Founders who have built profitable businesses but choose to retain those profits for growth rather than drawing dividends need lenders who will assess affordability based on the company’s net profit.
Founders with a track record of successful exits who are now building their next venture often have complex income streams from previous investments that high-street banks struggle to categorise.
Key Financial Risks of Standard Assessments
Approaching a standard high-street bank as a startup founder is often a waste of time.
The Problem with High-Street Lenders
If you pay yourself £30,000 a year to preserve cash, a high-street bank will only lend you around £135,000, completely ignoring the fact that your company might be generating £500,000 in profit or holds £2 million in VC funding.
Standard lenders usually demand two or three years of finalised accounts showing consistent profit. Startups often run at a planned loss in their early years to fuel rapid growth, resulting in automatic mortgage rejections
High-street banks place zero value on your illiquid shares in a private company, even if the company has a multi-million-pound valuation validated by institutional investors.
How Specialist Lenders Work
Unlocking Your True Affordability
Specialist lenders take a holistic, commercial view of your financial position.
If your startup is profitable, specialist lenders will assess your affordability based on your salary plus your share of the company’s net retained profit, dramatically increasing your borrowing power.
For loss-making but highly funded startups, some specialist private banks will lend based on the strength of the VC backing, the company’s cash runway, and the founder’s overall net worth trajectory.
While high-street banks want three years of history, specialist lenders will often consider applications from founders with just one year of exceptional trading history.
Case Studies
Key Considerations
Preparing for Your Application
To successfully apply for a mortgage as a founder, you need to present a compelling business case:
- The Narrative: You need a broker who can explain your business model, your growth strategy, and why your personal income is structured the way it is.
- Accountant’s Support: Lenders will often require a reference or projection from your accountant to verify the sustainability of the business and its cash position.
- Deposit: While specialist lending is flexible on income, it often requires a larger deposit (typically 15% to 25%) to mitigate the perceived risk of lending to an early-stage entrepreneur.
Speak to a Broadbench Specialist
You are building a valuable company; your mortgage lender should recognise that value.
Speak to a Broadbench mortgage specialist today to find out exactly how much you can borrow based on the true strength of your startup.
FAQs
What is an independent professional mortgage?
It’s a standard mortgage but assessed differently. Lenders consider your annualised contract rate instead of traditional income methods, helping independent professionals borrow based on true earnings. A specialist broker can help you access competitive rates.
Can I get a mortgage as a contractor?
Yes. While most high-street lenders struggle to assess contractor income accurately, specialist lenders can assess affordability based on your day rate or contract value. Broadbench works with lenders who understand contractor income structures, helping you borrow in line with your actual earning capacity rather than being limited by payslip-based assessments.
Does IR35 affect my mortgage application?
Yes. Your IR35 status affects how lenders assess your income. Outside IR35, specialist lenders can use your day rate to calculate affordability. Inside IR35, your employment income from your umbrella company or client payroll is used. In both cases, Broadbench will identify the lender and assessment method that gives you the most favourable outcome.
Can I get a mortgage if I earn a day rate, rather than PAYE?
Yes. Of course, there are factors that impact a contractor’s eligibility, but just by being self-employed, you should not expect to be turned down by a lender as long as they understand contractors and contracting. However, factors that would prevent anyone from securing a mortgage, such as a poor credit history or a bad payment record will apply just as much. to contractors as to employees.
Can I get a mortgage if I have only just started contracting?
Yes! As long as we can see you’ve got a history in the same line of work and in the same industry in which you are now contracting, there are lenders who accept new contractors.
What is a freehold?
The freeholder of a property owns it outright, including the land it’s built on. If you buy a freehold, you’re responsible for maintaining your property and land, so you’ll need to budget for these costs. Most houses are freehold but some might be leasehold – usually through shared-ownership schemes.
Why should I use a specialist Contractor broker?
By all means, go to a high street lender to satisfy your curiosity, but in most cases, the lender will have issues with how income reaches the contractor. High street lenders understand dividends, but business owners, professionals and contractors who are tax efficient and only draw down a minimum salary and dividends to meet their needs won’t look good. Specialist brokers like us go to the same lenders you see in the high street but at the head office underwriter level. This means they are speaking to people with a bigger lending mandate and a knowledge of this sector contractors, and they use the contract to define a contractor’s income.
Do I need three years of company accounts before I apply?
Lots of contractors have the misconception that they cannot get a mortgage without three years of accounts. Whereas that might have been the case several decades ago, this is certainly no longer true.
Stop Letting Your Growth Strategy Limit Your Mortgage
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