The Right to Buy cost floor rule is one reason your Right to Buy discount could be lower than expected. It can apply where your landlord has spent money buying, building, repairing, maintaining or improving your home.
A lower discount means a higher purchase price. That can increase the amount you need to borrow through a Right-to-Buy mortgage and affect whether the discount can help as your deposit.
The cost floor is one of several rules that can affect how Right to Buy works and the final price you are offered for your council home.
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What is the Right to Buy cost floor rule?
The cost floor limits how far your discount can reduce the price of your home.
It looks at certain costs your landlord has incurred on the property over a set period. If those costs mean the home cannot be sold as cheaply as your normal discount would suggest, your discount can be reduced.
It does not affect every purchase, and it does not always remove the discount. Your landlord confirms whether it applies and how it affects your offer.
For applications successfully lodged before 21 November 2024, it is generally 10 years, or 15 years where the home was built or acquired by the landlord on or after 2 April 2012.
A 15-year period also applies to Preserved Right to Buy, so the rules affecting your purchase can depend on which scheme and application date apply to you.
Example of how the cost floor could affect your price
Suppose your home is valued at £160,000:
Expected discount: £26,000
Expected purchase price: £134,000
Cost-floor minimum sale price: £148,000
Revised discount: £12,000
Revised purchase price: £148,000
Here, the discount falls by £14,000, so the buyer would need to cover an extra £14,000 through their mortgage, cash or both.
This is only an example. Your landlord calculates the actual figures.
Where will you see the cost floor adjustment?
If your landlord agrees that you have the Right to Buy, they will send you a Section 125 Notice setting out the proposed price, discount and terms of sale.
The notice should state if your discount has been reduced because of the cost floor. If the figure is unclear, ask your landlord to explain it. You should also make sure you have told them about improvements you paid for yourself.
How could the cost floor rule affect your mortgage?
A smaller discount usually means a higher Right-to-Buy purchase price. That may mean:
You need to borrow more.
Your estimated monthly repayments rise.
The higher mortgage amount affects affordability.
The remaining discount is less useful as a deposit.
You decide the purchase no longer works for your budget.
This can be particularly important if you were planning on using your Right to Buy discount as a deposit. Some lenders may accept the discount instead of a separate cash deposit, but a smaller discount can change those figures.
You can adjust the property value and discount in our Right-to-Buy mortgage calculator to estimate how the revised purchase price could affect your mortgage amount and monthly repayments.
What should you do if your discount is lower than expected?
If the figures in your offer are different from what you expected:
Check the Section 125 Notice.
Ask your landlord to explain the cost-floor adjustment.
Check that improvements you paid for yourself have been recorded.
Consider independent legal advice if you disagree with or do not understand the figure.
Recheck your mortgage numbers before deciding whether to continue.
A mortgage broker cannot decide whether the cost floor has been applied correctly. Their role becomes more relevant once your landlord has confirmed the revised price and discount.
When to speak to a mortgage broker
Once those figures are known, a broker can check whether the higher borrowing amount looks affordable, whether the remaining discount may still work as a deposit and which lenders may consider the case.
If the cost floor has changed the amount you need to borrow, getting help with a Right-to-Buy mortgage can help you understand whether the revised purchase price still works with your income, deposit position and lender options.
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FAQs
Why has my Right-to-Buy discount been reduced?
The cost floor is one possible reason. It can limit the discount where your landlord has incurred certain costs on the property.
Does the cost floor mean I cannot buy my council house?
No. It may increase the purchase price, but it does not automatically stop you buying.
Can I challenge the cost floor figure?
If you do not understand or agree with the adjustment, ask your landlord for clarification and consider independent legal advice.
Does the cost floor affect my mortgage?
It can. A reduced discount increases the purchase price, which may mean you need a larger mortgage and could change your affordability.
Can the discount still be used as a deposit?
Potentially. Some lenders may accept the remaining discount as a deposit, but this depends on the lender and your wider application.
Right to Buy and Right to Acquire can both help some social housing tenants buy their rented home at a discount, but they are different schemes. Right to Buy is mainly for eligible council tenants. Right to Acquire may apply to some housing association tenants, while others may have Preserved Right to Buy because their home transferred from a council.
Your landlord must confirm which scheme, if any, applies.
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Right to Buy vs Right to Acquire: the simple difference
Scheme
Usually applies to
Discount
Eligibility confirmed by
Right to Buy
Eligible council tenants
Regional cash limits apply
Council or landlord
Preserved Right to Buy
Some tenants whose home transferred from a council
Similar to Right to Buy
Housing association or landlord
Right to Acquire
Some housing association tenants
Usually a smaller fixed discount
Housing association or landlord
Your landlord, tenancy history and property all matter. Eligibility is not automatic.
The property normally needs to be your main or only home, be self-contained and be held under a secure tenancy. You will also usually need at least three years as a public-sector tenant. Your council must assess the application.
What is Preserved Right to Buy?
Most housing association tenants do not have standard Right to Buy. You may have Preserved Right to Buy if you were a secure council tenant and lived in the property when it transferred to a housing association.
For example, if your council transferred your home but you remained there, your right may have been preserved. Your landlord can confirm whether this applies.
What is Right to Acquire?
Right to Acquire may allow an eligible housing association tenant in England to purchase their rented home at a discount.
Both the tenant and property must qualify. The property generally needs to have been built, bought or transferred under the scheme’s rules, and the landlord must be registered with the Regulator of Social Housing.
The April 2026 GOV.UK guide says discounts are between £9,000 and £16,000, depending on location.
Which scheme might apply to you?
As a broad guide:
Council tenant: Right to Buy may apply.
Housing association tenant who lived in the home when it transferred from a council: Preserved Right to Buy may apply.
Other housing association tenant: Right to Acquire may be worth checking.
Your landlord must check the full circumstances, including the property and tenancy history.
How do the discounts compare?
Right to Buy discounts can depend on the property type and how long you have been a public-sector tenant, but a regional maximum cash limit also applies.
For eligible applications received from 21 November 2024 onwards, current maximum Right to Buy cash discounts range from £16,000 to £38,000, depending on the region. Earlier applications may have been assessed under the previous, higher limits.
Right to Acquire offers a fixed cash discount of £9,000 to £16,000, based on location.
Discount rules can change, so check current official guidance and ask your landlord to confirm the amount.
Can you get a mortgage with either scheme?
Qualifying for a scheme does not guarantee mortgage approval. A lender will still assess whether the loan is affordable and whether the property is acceptable security.
Some lenders may accept the Right to Buy discount as some or all of the equity normally provided by a cash deposit. Others may require your own money, depending on the mortgage and their limits.
Treatment of a Right-to-Acquire mortgage can also vary. Neither scheme guarantees a no-deposit mortgage, and published lender criteria show that providers approach discounted purchases differently.
If Right to Buy applies, our Right-to-Buy mortgage calculator can give you a rough estimate of how the discount affects the figures. It is mainly designed around Right-to-Buy calculations.
Why property type can matter
Some lenders may be cautious about certain high-rise flats, non-traditional construction, short leases or homes with limited resale demand.
The lender and its valuer must still be satisfied with its construction, condition and marketability.
When should you speak to a mortgage broker?
It may help to speak to a broker after your landlord confirms the scheme, or once you receive a valuation and formal offer.
A broker can assess affordability, credit history, property type and how lenders may treat the discount. If you want to see whether it’s possible to buy your council home, Monday Mortgages can help through its Right-to-Buy mortgage advice service.
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Right to Buy and Right to Acquire FAQs
What is the difference between Right to Buy and Right to Acquire?
Right to Buy is mainly for eligible council tenants. Right to Acquire may apply to some housing association tenants and qualifying homes.
Can housing association tenants use Right to Buy?
Usually not, but some may have Preserved Right to Buy if they lived in the home when it transferred from a council.
What is Preserved Right to Buy?
It is a right that may continue after an occupied council home transfers to a housing association.
Is the Right to Acquire discount lower than Right to Buy?
Right to Acquire currently offers £9,000 to £16,000. Maximum Right to Buy cash discounts currently range from £16,000 to £38,000, although an individual discount may be lower.
Can I get a mortgage with Right to Acquire?
Possibly, but approval depends on affordability, credit history, the property and the lender’s criteria.
Yes, you can get a mortgage when self-employed. Being self-employed does not automatically stop you from getting a mortgage, but mortgage lenders are also required to assess whether repayments are affordable using evidence of income and expenditure, rather than relying on an income multiple alone.
Therefore they’ll usually need to see clear evidence of your income, affordability and how sustainable your earnings are.
That means your application may be assessed slightly differently from someone in standard employment. Instead of relying only on payslips, lenders may look at accounts, tax calculations, bank statements, company income or contracts, depending on how your business is set up.
For many people asking whether you can get a mortgage when self-employed, the answer is yes, but how straightforward it feels can depend on your trading history, deposit, credit history, income stability and lender choice.
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Can you get a mortgage when self-employed?
You can get a mortgage if you’re self-employed, as long as a lender is comfortable that the mortgage is affordable and your income can be evidenced.
The key point is that lenders usually want to understand:
How long you’ve been self-employed
How much you earn
Whether your income is stable
How your income is taken from the business
What deposit you have
Whether your credit history supports the application
Whether you have debts, dependants or regular commitments
A self-employed mortgage is not a separate type of mortgage. It usually means a normal residential mortgage where your income comes from self-employment rather than employment.
What counts as self-employed for a mortgage?
For mortgage purposes, self-employed applicants can include several types of workers and business owners.
You may be treated as self-employed if you are a:
Sole trader
Limited company director
Contractor
Freelancer
Partner in a business or partnership
How your income is assessed can depend on your structure. A sole trader may be assessed using net profit. A company director may be assessed using salary and dividends, or sometimes other business figures depending on the lender.
For example, if you run your own limited company and take a small salary plus dividends, a lender may look at your income differently from a freelancer who reports annual self-employed profit through self assessment. If this applies to you, a more specific limited company director mortgage guide may be useful later.
How long do you need to be self-employed to get a mortgage?
Many lenders prefer to see at least two years of self-employed income evidence. This helps them understand whether your earnings are consistent rather than based on one unusually strong year.
However, two years is not always a fixed rule across every lender. Some people may still have options with one year’s accounts, especially if the rest of the application is strong. Halifax, for example, currently says it can consider applicants who have been trading for at least one full year, although additional information may be required.
A strong application could include:
A good deposit
Clean credit history
Strong previous experience in the same industry
Stable or growing income
Low debts and commitments
Clear evidence of ongoing work
For example, a contractor with one year’s accounts and several years of previous employment in the same sector may be viewed differently from someone who has only recently started a completely new business.
How income evidence affects your application
When you apply for a mortgage when self-employed, lenders usually focus on provable income rather than headline turnover.
For example, if you’re a sole trader, your turnover may look high, but lenders are more likely to focus on profit after business expenses. If you’re a company director, they may look at salary, dividends or other business figures depending on the lender’s criteria.
This does not mean every lender asks for the same documents in every case. The aim is usually to check that your income is real, evidenced and likely to continue.
For example, a sole trader with two years of steady net profit may have a simpler application than someone with large income swings or unclear business records. If you’re not sure what you may need, it can help to check the documents you need for a self-employed mortgage before applying.
Does your deposit size matter?
Your deposit can make a difference to self-employed mortgage eligibility, but it is only one part of the application.
A larger deposit may reduce the lender’s risk and could increase the number of options available. However, it does not replace the need for clear income evidence. A lender still needs to be comfortable that the mortgage is affordable.
Self-employed applicants do not automatically need a bigger deposit just because they’re self-employed. But if your income is more complex, your trading history is shorter or your credit history is not perfect, a stronger deposit may help the overall case if you’re self-employed.
For example, someone with a 15% deposit, steady income and clean credit may have more options than someone with a smaller deposit and unclear income evidence.
How credit history affects self-employed mortgage eligibility
Credit history still matters when you’re self-employed.
A good credit history can support your application because it shows lenders you’ve managed borrowing responsibly. Missed payments, defaults, county court judgments or high levels of debt may reduce the number of lenders available.
This does not always mean you cannot get a mortgage. It means lender choice and the wider details of your application may become more important.
Lenders may also look at your regular commitments, such as loans, credit cards, car finance, childcare costs and dependants. These can affect affordability because they reduce the amount of income available for mortgage repayments.
What if your income has gone up or down recently?
Lenders usually want to know that your income is sustainable, not just high in one month or one year.
If your profits have increased, that can be positive, but a lender may still want to understand whether the increase is likely to continue. If your profits have dropped, the lender may focus more heavily on the latest year or ask for context around the change.
For example, if your latest-year profit has fallen because of a one-off expense, that may need explaining. If profits have fallen because the business is receiving less work, that could affect affordability.
Having two years of accounts can make a self-employed mortgage application easier to assess because the lender has more evidence to work with.
With two years, lenders can compare income over time and see whether it has stayed stable, grown or declined. With one year, there is less history, so the lender may look more carefully at the rest of the case.
That does not mean one year is impossible. It means the application may depend more on the lender, your deposit, your credit history, your business type and your previous experience.
For example, a freelancer with two years of consistent profit may have a more straightforward case than a newly self-employed applicant with only one tax year completed. But someone with only one year of self-employed accounts and strong wider evidence may still have options.
How to check how much you might be able to borrow
Once you know that getting a mortgage when self-employed is possible, the next question is usually how much you might be able to borrow.
Your borrowing amount can depend on:
Your self-employed income
Your deposit
Your regular debts and commitments
Your dependants
Your credit history
The lender’s affordability rules
How your income is evidenced
A calculator cannot guarantee what a lender will offer, but it can give you a useful rough starting point.
Mortgage advice can be helpful if your income is not straightforward, you have a short trading history or you’re unsure which lenders may consider your situation.
This can be especially useful if you:
Have one year’s accounts
Are a limited company director
Have recently changed from employed to self-employed
Have income that has gone up or down
Take salary and dividends
Have retained profits in the business
Work as a contractor or freelancer
Have credit issues or existing debts
A broker can help you understand which lenders may be more suitable, what income evidence may be needed and whether your application is likely to fit before you apply.
If your situation is more complex, Monday Mortgages can help you understand your self-employed mortgage options before you approach lenders.
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FAQs
Is it harder to get a mortgage when self-employed?
It is not automatically harder to get a mortgage when self-employed, but you may need to provide more evidence of your income. Lenders usually want to see that your earnings are stable, affordable and likely to continue.
How many years do you need to be self-employed to get a mortgage?
Many lenders prefer two years of self-employed income evidence, but some may consider applicants with one year’s accounts depending on the wider case. Your deposit, credit history, industry experience and income stability can all matter.
Can I get a mortgage with one year’s accounts?
Yes, it may be possible to get a mortgage with one year’s accounts, but it is not guaranteed. Lender choice is important because not every lender will consider shorter trading history in the same way.
Do I need a bigger deposit if I’m self-employed?
Not automatically. A bigger deposit can help because it may reduce lender risk, but self-employed applicants do not always need a larger deposit just because of how they earn their income.
Do lenders use profit or turnover for self-employed mortgages?
Lenders usually focus on profit or income taken from the business, not turnover alone. For sole traders, this may mean net profit. For company directors, lenders may look at salary, dividends or other company figures depending on their criteria.
Can company directors get self-employed mortgages?
Yes, company directors can get mortgages. The lender may assess salary, dividends, retained profit or a combination of income sources depending on the case and the lender’s rules.
If you live in a council property, you might be wondering whether you can buy your council house and become the owner of the home you already live in.
The short answer is: some council tenants may be able to buy their home through Right to Buy, but it depends on your tenancy, your property and your personal circumstances. Your council or landlord must confirm whether you’re eligible.
If you do qualify, the next question is usually whether buying your council house is affordable and whether you can get a mortgage. These are separate checks. Being eligible for Right to Buy doesn’t automatically mean a lender will approve you for a mortgage.
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Can you buy your council house?
You may be able to buy your council house if you meet the Right to Buy rules. These rules look at things like your tenancy type, how long you’ve been a public sector tenant, whether the property is your main home and whether the home itself can be bought under the scheme.
For most people, the first step isn’t the mortgage. It’s checking whether you actually have the right to buy the property.
Your landlord or council is responsible for confirming this. A mortgage broker can help with the mortgage side, but they can’t confirm your legal eligibility for Right to Buy.
What is Right to Buy?
Right to Buy is a scheme that can allow eligible council tenants to buy their council home at a discount.
Instead of paying the full market value, you may be able to buy at a reduced price. The discount depends on factors such as how long you’ve been a public sector tenant, the type of property, where it is and any rules that reduce or cap the discount.
If you’re starting to look at the mortgage side, our Right-to-Buy mortgages page can help explain how lenders may look at the application.
What might affect whether you can buy your council home?
Several things can affect whether you can buy your council home through Right to Buy.
Check
Why it matters
Tenancy type
Right to Buy usually depends on having the right type of tenancy.
Main home
The property usually needs to be your only or main home.
Tenancy history
Your time as a public sector tenant can affect whether you qualify and the discount.
Property type
Some homes may be excluded from Right to Buy.
Legal or tenancy issues
Debt, possession or tenancy issues may affect the application.
Landlord confirmation
Your council or landlord must confirm whether you’re eligible.
Some homes may be excluded because of the property type, the type of tenancy, planned demolition, or because the property is specially suited to elderly or disabled residents.
This is why it’s important to check with your landlord before making firm plans around purchasing your council house.
Why tenancy type matters
Your tenancy type is one of the biggest factors.
Right to Buy is mainly associated with secure council tenants. If you’re not sure whether you’re a secure tenant, your tenancy agreement or landlord should be able to confirm this.
Some tenants may also have Preserved Right to Buy. This can apply where someone was originally a council tenant, but the home was transferred to another landlord, such as a housing association.
The key point is that not every social housing tenant has the same rights. Before thinking too far ahead about buying a council house, make sure you understand what type of tenancy you have.
Can housing association tenants buy their home?
Housing association tenants may not always have the same rights as council tenants.
Some may have Preserved Right to Buy if they were living in the home when it transferred from the council to a housing association. Others may have a different option, such as Right to Acquire, depending on their circumstances.
Our guide to Right to Buy and Right to Acquire explains the main differences between the schemes and which type of tenant each one may apply to.
If you rent from a housing association, check directly with them. They can confirm whether Right to Buy, Preserved Right to Buy, Right to Acquire or another option may apply.
The amount can depend on the type of property, how long you’ve been a qualifying public sector tenant, the value of the property, where it is and whether any rules reduce the discount.
Here’s a simple example of how the discount could affect the purchase price:
Example
Amount
Property value
£180,000
Right to Buy discount
£20,000
Discounted purchase price
£160,000
Mortgage needed before any cash contribution
£160,000
This is only a simple example. Your actual Right to Buy discount and purchase price would need to be confirmed by your landlord.
What happens after you apply to buy your council house?
The process usually starts with checking whether you may be eligible and then submitting the Right to Buy application to your landlord.
At a high level, the process looks like this:
Step
What happens
Check eligibility
You look at whether Right to Buy may apply to your tenancy and property.
Apply
You submit the Right to Buy application to your landlord.
Landlord response
Your landlord confirms whether they accept that you have the right to buy.
Offer notice
If accepted, your landlord provides details of the valuation, discount and purchase price.
Decide whether to continue
You review the numbers and decide whether buying your council home still makes sense.
Arrange the mortgage
If you need a mortgage, this is when the lender side becomes more important.
Complete the purchase
Your solicitor handles the legal process through to completion.
You don’t have to continue just because you’ve applied. If the numbers don’t work, or you decide home ownership isn’t right for you, you can choose not to proceed.
Can you get a mortgage to buy your council house?
Many people need a mortgage unless they can buy the property outright.
A lender will still assess your application in the normal way. They’ll usually look at your income, outgoings, credit history, debts, age, mortgage term and the property itself.
This is an important distinction:
Right to Buy eligibility
Mortgage approval
Confirmed by your council or landlord
Decided by the lender
Looks at your tenancy and property
Looks at income, affordability and credit history
Confirms whether you can apply to buy
Confirms whether you can borrow enough
May include a discount
May depend on whether the lender accepts the discount as deposit
Some properties can also be more difficult to mortgage. For example, certain flats, high-rise blocks or non-standard construction properties may reduce the number of lenders available.
If you want help with a Right-to-Buy mortgage, it can be useful to speak to a broker before making assumptions about what you can borrow.
Could the discount help with the deposit?
In some cases, yes.
Some lenders may allow the Right-to-Buy discount to take the place of some or all of a separate cash deposit.
Halifax, for example, currently allows lending up to 100% of the discounted purchase price, subject to its normal valuation-based lending limits.
However, this isn’t guaranteed. It depends on the lender, the size of the discount, the property and your wider circumstances.
For example, one lender might be comfortable using the discount as the deposit, while another may still want you to contribute some of your own money. This is one reason why Right-to-Buy mortgage options can vary between lenders.
You can use our Right-to-Buy mortgage calculator to get a rough idea of how the discount could affect the purchase price, mortgage amount and possible deposit position.
What might affect your mortgage options?
Your mortgage options may depend on both your finances and the property you’re buying.
Factor
How it may affect your mortgage
Income
Helps lenders decide how much you may be able to borrow.
Employment type
Self-employed applicants may need different income evidence.
Benefits income
Some lenders may accept certain benefits income, but rules vary.
Monthly commitments
Loans, credit cards and other regular payments can reduce affordability.
Credit history
Missed payments, defaults or arrears may reduce lender options.
Age and mortgage term
The mortgage term can affect monthly payments and lender criteria.
Property type
Some properties can be harder to mortgage.
Discount size
A larger discount may improve the numbers, but it doesn’t guarantee approval.
Deposit treatment
Some lenders may use the discount as the deposit, while others may not.
If you’re self-employed, you may need to show your income in a way the lender accepts. Our self-employed mortgage advice can help explain what lenders may ask for.
If you’ve had credit issues, such as missed payments, defaults or arrears, your options may be narrower. In that situation, it may be worth looking at adverse credit mortgage support before applying.
When should you speak to a mortgage broker?
You may want to speak to a mortgage broker once you’ve started checking whether you can buy your council house, especially if you want to understand whether the mortgage side is likely to work.
This can be helpful if you’ve received or estimated the property value, you’re unsure whether the discount can count as your deposit, you’re self-employed, you have credit issues, or the property type may be harder to mortgage.
If you’re thinking about buying your council home and want to understand the mortgage side, Monday Mortgages can help you check your options.
You can also use our Right-to-Buy mortgage calculator to estimate your discounted purchase price, mortgage amount and possible deposit position.
[FAQ]
FAQs
Can you buy your council house?
Some council tenants may be able to buy your council house through Right to Buy, but eligibility depends on your tenancy, property and circumstances. Your landlord or council must confirm whether you qualify.
Can you buy your council house if you’re on benefits?
Possibly. Being on benefits doesn’t automatically mean you can’t buy, but mortgage lenders will look at whether your income is acceptable and whether the mortgage is affordable.
Can you buy your council house if you’re self-employed?
Yes, being self-employed doesn’t automatically stop you from buying your council house. Lenders will usually want to understand your income, trading history and affordability before offering a mortgage.
Can you buy your council house without a deposit?
Some lenders may accept the Right to Buy discount as the deposit, meaning a separate cash deposit may not always be needed. This depends on the lender, your circumstances and the property.
Can you buy your council house with bad credit?
Bad credit doesn’t always make it impossible, but it can limit your options. Lenders will look at what happened, how recent it was, how serious it was and whether your finances are now stable.
Is being eligible for Right to Buy the same as getting a mortgage?
No. Right to Buy eligibility is confirmed by your landlord or council. Mortgage approval is decided by a lender based on income, affordability, credit history and the property.
If you’re a council tenant and have started looking into ways to buy your home, you may have come across Right to Buy. It’s a scheme that can allow eligible tenants to buy their council home at a discount, which may make home ownership feel more achievable.
But it’s important to understand how the scheme works before assuming it’s the right route for you. Right to Buy can reduce the price you pay, but it doesn’t automatically mean you’ll qualify, get the maximum discount or be approved for a mortgage.
This guide focuses on Right to Buy in England. Different rules may apply in Scotland, Wales and Northern Ireland.
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So what is Right to Buy?
The simple answer is that it’s a government scheme that may let eligible council tenants buy the home they already live in for less than its full market value.
The discount is based on your circumstances and the rules that apply when you apply. It isn’t paid to you as cash. Instead, it reduces the purchase price of the property.
For example, if your home is valued at £180,000 and your confirmed discount is £26,000, the price you pay would be £154,000.
That lower price can make buying your council home more realistic, especially if you’ve lived there for a long time and want to stay in the property.
Who is Right to Buy for?
Right to Buy is generally aimed at eligible council tenants.
Some housing association tenants may also have something called Preserved Right to Buy if their home was transferred from the council to another landlord while they were living there.
At a high level, your eligibility can depend on things like:
Whether you’re a secure tenant
Whether the property is your only or main home
Whether the property is self-contained
Whether you’ve had a public sector landlord for at least 3 years in total — the years don’t have to be consecutive
Whether any exclusions apply
This article isn’t a full eligibility guide, and your landlord or council should confirm whether you qualify. If you’re unsure, that’s usually the best first place to check.
The Right-to-Buy discount reduces the price you pay for your home. It can depend on several factors, including the type of property, where it is, how much it’s worth and how long you’ve been a qualifying tenant.
Under the April 2026 government guidelines, maximum cash discounts are currently between £16,000 and £38,000, depending on location.
There are also rules that can reduce the discount. For applications made after 21 November 2024, for example, the discount can be reduced if your landlord has spent money building or maintaining the home during the previous 30 years. This is known as the cost floor rule.
Your landlord will confirm the property valuation, the discount and the price you’d need to pay.
How does buying your council home work?
The exact process is handled through your landlord, but the broad steps usually look like this:
Check whether you may be eligible
Apply through your landlord or council
Wait for the landlord’s response
Receive the offer notice, valuation and confirmed discount
Many people need a mortgage unless they can buy the home outright with cash.
People often use the phrase Right to Buy mortgage, but this usually means a normal mortgage used to buy a property through the Right to Buy scheme. It isn’t a separate government mortgage product.
That means the lender will still assess your application. They’ll usually look at your income, spending, credit history, debts, age, mortgage term and the property itself.
This is where Right to Buy mortgages can be slightly different from a standard home purchase. The property may already have a confirmed discount, and some lenders may treat that discount in a helpful way. But lender criteria can vary, so it’s worth checking your options before assuming every lender will view the application the same way.
Can the Right-to-Buy discount help with the deposit?
In some cases, yes. Some lenders may accept the discount as the deposit, which could mean you don’t need a separate cash deposit.
But this isn’t guaranteed.
It can depend on the lender, your affordability, your credit history, the property type and the size of the discount, as noted in the government guidance for buyers. Some lenders may still want you to contribute cash, or they may have specific rules around how the discount is treated.
This is one reason Right-to-Buy mortgage advice can be useful before you get too far into the process. A broker can help you understand which lenders may be comfortable with your situation and whether the discount could work as the deposit.
Example of how Right to Buy could work
Here’s a simple example:
Estimated property value: £180,000
Example Right-to-Buy discount: £26,000
Discounted purchase price: £154,000
Mortgage needed: £154,000, if no separate cash deposit is used
In this example, the discount reduces the amount the buyer needs to borrow. If a lender accepts the discount as the deposit, the buyer may not need to put in a separate cash deposit.
But this is only an example. Your actual figures will depend on your property value, confirmed discount, lender criteria and personal circumstances.
You can use our Right-to-Buy mortgage calculator to get a rough idea of how the discount could affect your purchase price, mortgage amount and possible deposit position.
What could affect your mortgage options?
Even with a discount, the lender still needs to decide whether the mortgage is affordable and whether the application meets its lending criteria.
They may look at:
Your income
Your employment type
Your regular spending
Loans, credit cards and other commitments
Your credit history
Your age and mortgage term
The property type and condition
Whether the discount can be treated as deposit
FCA affordability rules require regulated mortgage lenders to take account of income, committed expenditure and essential household costs when assessing affordability.
The property itself can also matter. Some lenders may be more cautious with certain flats, high-rise blocks, non-standard construction or properties with major repair concerns.
If you’ve had credit issues such as missed payments or defaults, that doesn’t always mean buying is impossible, but it may affect which lenders are available. In that situation, it may help to look at adverse credit mortgage options before applying.
If you’re self-employed, lenders may also look closely at how your income is evidenced. You may want to understand self-employed mortgage advice before relying on your income figures.
What other costs should you think about?
Right to Buy isn’t only about the purchase price and mortgage payment. Once you own the home, you’ll usually be responsible for more costs than you were as a tenant.
These can include:
Legal fees
Survey costs
Mortgage fees
Buildings insurance
Repairs and maintenance
Service charges if you’re buying a flat or leasehold house
If you’re buying a flat, you’ll usually become a leaseholder. The landlord will normally remain responsible for maintaining the wider building and communal areas, while you’ll pay your share through service charges and may also have to contribute towards major works.
It’s also worth checking the current resale rules if you think you might sell later. If you sell within five years of buying through Right to Buy, you’ll usually have to repay some or all of the discount. If you sell within 10 years, you must first offer the property to your old landlord or another social landlord in the area.
When should you speak to a mortgage broker?
You may want to speak to a mortgage broker once you have an idea of the property value, discount and likely purchase price.
It can also help to speak to someone earlier if you’re unsure whether the numbers are realistic, whether your income is likely to fit, or whether the discount could be accepted as the deposit.
A broker can help explain lender options, affordability and what may be possible based on your situation.
If you’re thinking about buying your council home and want to understand the mortgage side, Monday Mortgages can help you check your options. You can also use our mortgage calculators to estimate your mortgage costs before deciding what to do next.
[FAQ]
FAQs
What is Right to Buy?
Right to Buy is a scheme that may allow eligible council tenants to buy the home they live in at a discount. The discount reduces the purchase price rather than being paid to you as cash.
Who can use Right to Buy?
Right to Buy is generally for eligible council tenants, although some housing association tenants may have Preserved Right to Buy. Your landlord or council should confirm whether you and your property qualify.
How much discount can you get with Right to Buy?
The discount depends on factors such as the property, location, value and your qualifying tenancy history. Under the April 2026 government guide, maximum cash discounts are currently between £16,000 and £38,000, depending on location.
Do you need a deposit for Right to Buy?
Not always. Some lenders may accept the Right-to-Buy discount as the deposit, but this depends on the lender and your circumstances. A separate cash deposit may still be needed in some cases.
Can you get a mortgage for Right to Buy?
Yes, many people use a mortgage to buy their home through Right to Buy. A Right to Buy mortgage is still assessed by the lender, so affordability, credit history and property type still matter.
Is Right to Buy the same as getting a mortgage approved?
No. Right to Buy relates to whether you can buy your home through the scheme. Mortgage approval is a separate lender decision based on your finances, the property and the lender’s criteria.
If you’re buying your council home through Right to Buy, one of the biggest questions is whether you need savings for a mortgage deposit.
The short answer is: some lenders may accept your Right to Buy discount as deposit, which means you may not need a separate cash deposit. But this isn’t guaranteed. It depends on the lender, the size of your discount, the property, your income, your credit history and whether the mortgage is affordable.
A Right to Buy discount can make a big difference to the amount you need to borrow. But a Right to Buy mortgage still has to meet lender criteria, so it’s important to understand how the deposit side works before you apply.
Right to Acquire is a separate scheme with different discount rules. If you rent from a housing association, our guide to Right to Buy and Right to Acquire can help you understand which scheme may be relevant before looking at the mortgage figures.
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Can your Right to Buy discount be used as a deposit?
In some cases, yes. Some lenders may treat the discount you receive through Right to Buy as your deposit.
This can be helpful because the discount reduces the price you pay for the property. Instead of saving a traditional 5%, 10% or 15% cash deposit, your discount may create enough equity for the lender to consider the mortgage without you putting in extra money.
For example, if your home is worth £160,000 and your council sells it to you for £144,000 after a £16,000 discount, some lenders may consider lending the full £144,000 purchase price without you adding a separate cash deposit.
That said, lender treatment varies. Some may accept the discount instead of a separate cash deposit, while others may apply different deposit or loan-to-value requirements.
This is also reflected in the official government guidance, which notes that some lenders treat the Right to Buy discount as the deposit while others do not.
This is where qualified Right to Buy mortgage advice can help, especially if you’re unsure which lenders are likely to consider your case.
How a Right to Buy deposit works
With a standard house purchase, the deposit is usually money you contribute from your own savings. If you buy a £200,000 home with a 10% deposit, you pay £20,000 and borrow £180,000.
Right to Buy works differently.
There are three separate parts to understand:
The market value of the property
The Right to Buy discount offered by your council or landlord
The discounted purchase price you actually pay
The discount isn’t cash sitting in your bank account. It’s a reduction in the purchase price. But because you’re buying the property below its market value, some lenders may treat that discount as equity in the property.
That’s why a Right to Buy mortgage deposit can be different from a normal mortgage deposit. In some cases, the discount does the job that a cash deposit would normally do.
That means “no cash deposit” is usually a clearer way to think about it. The key question is whether your lender will accept the discount instead of a separate cash contribution.
Example of a Right to Buy discount as deposit
Here’s a simple example using a £16,000 discount. Actual discounts depend on your circumstances and location, with current regional maximum cash discounts ranging from £16,000 to £38,000.
Item
Amount
Market value
£160,000
Right to Buy discount
£16,000
Discounted purchase price
£144,000
Cash deposit
£0
Mortgage needed
£144,000
In this example, the buyer needs a mortgage of £144,000 to buy a property worth £160,000.
If the lender allows borrowing of 100% of the discounted purchase price at this level of loan-to-value, the buyer may not need to add a separate cash deposit.
However, this still depends on lender criteria. If the buyer has credit issues, high debts, unstable income or the property raises concerns, the lender may take a different view.
You can use a Right to Buy mortgage calculator to estimate your discounted purchase price and see how the numbers could look before speaking to a broker.
Discounted purchase price vs market value
One point that can cause confusion is loan-to-value, often shortened to LTV. With Right to Buy, lenders can apply limits using both the discounted purchase price and the property’s open-market value.
Using the example above:
Market value: £160,000
Discounted purchase price: £144,000
Mortgage requested: £144,000
The mortgage is therefore 100% of the discounted purchase price, but 90% of the property’s open-market value.
This distinction matters because lender criteria differ.
NatWest, for example, currently allows borrowing of up to 100% of the discounted purchase price, subject to a maximum of 90% of the open-market value and its current product LTV limits.
Halifax also says it may accept loans up to 100% of the discounted purchase price, provided the loan stays within its lending limits based on the valuation.
This is one of the main reasons a Right to Buy mortgage with no cash deposit may be possible with some lenders, but not with others.
Why some lenders may still ask for a cash deposit
Even if you have a large discount, a lender may still ask for a cash deposit or extra evidence.
Reasons can include:
The lender doesn’t accept the full discount as deposit
Your affordability is tight
You have missed payments, defaults or other credit issues
You have existing debts or commitments
The property type is harder to lend on
The valuation raises concerns
Your income is harder to evidence
The lender wants to see funds for fees or other costs
A Right to Buy no deposit mortgage should never be treated as automatic. The discount can help, but the lender still needs to be comfortable with the whole application.
You should also remember that no cash deposit doesn’t mean no costs at all. You may still need money for legal or conveyancing fees, surveys or valuations, mortgage fees and other costs involved in buying your home.
What lenders may check before accepting the discount
The discount can improve the equity position, but it does not replace the lender’s affordability checks. Under FCA affordability rules, regulated mortgage lenders must assess affordability using the applicant’s income and expenditure and must not base that assessment on the equity in the property.
If you’re self-employed, the lender may need more detail about your accounts, tax calculations or business income. In that case, it may help to understand your self-employed mortgage options before applying.
If you’ve had missed payments, defaults or other credit issues, you may need a lender that is more comfortable with an adverse credit mortgage case.
Can you get a Right to Buy mortgage with no cash deposit?
Yes, it may be possible in some cases. If the lender accepts the Right to Buy discount as the deposit, and the rest of your application fits their criteria, you may be able to buy without putting down a separate cash deposit.
But this depends on the full situation.
A lender will still want to know that the mortgage is affordable, the property is acceptable security and your credit history fits their rules. They may also want to see that you can cover the other costs involved in buying your home.
Before relying on the discount, check your eligibility and discount amount with your council or landlord. They are the ones who confirm whether you qualify and how much discount you may receive.
What if you have adverse credit?
Adverse credit doesn’t always mean you can’t get a Right to Buy mortgage. But it can reduce the number of lenders available to you.
A lender may look at:
What the credit issue was
How long ago it happened
Whether it has been settled
How your finances look now
Whether the mortgage is affordable
If the discount is strong but your credit history is more complex, it may be worth getting advice before applying.
A failed application can be frustrating, especially if the issue could have been avoided by choosing a more suitable lender.
Getting mortgage advice before applying
Right to Buy can be a strong route into home ownership, especially if your discount reduces or removes the need for a cash deposit.
But lender criteria can vary. One lender may accept the discount as deposit, while another may ask for extra cash or decline the case for a different reason.
A broker can help check which lenders may consider your discount, how they may assess your loan-to-value, and whether your income and credit profile are likely to fit.
If you’re buying your council home and are unsure whether your discount could work as your deposit, Monday Mortgages can help you understand your options before you apply. You can get help with a Right to Buy mortgage and check whether a lender may accept your discount instead of a separate cash deposit.
Can I use my Right to Buy discount as my mortgage deposit?
Some lenders may accept your Right to Buy discount as your deposit. This means you may not need a separate cash deposit, but it depends on the lender and your wider application.
Do I need savings to buy my council house?
Not always. Some buyers can use their discount instead of a cash deposit. However, you may still need savings for legal fees, valuation fees, moving costs or other purchase costs.
Can I get a Right to Buy mortgage with no cash deposit?
It may be possible with some lenders if they accept the discount as deposit and the mortgage is affordable. It isn’t guaranteed, and lender criteria can vary.
Do all lenders accept the Right to Buy discount as deposit?
No. Some lenders may accept the discount as the full deposit, while others may want a separate cash deposit or apply different rules.
Does bad credit affect using the discount as deposit?
Yes, it can. Credit issues may limit your lender options, even if the discount means you’re borrowing less relative to the property’s market value.
Can self-employed applicants use the Right to Buy discount as deposit?
Potentially, yes. The lender will still need to check your income evidence, affordability and wider application before deciding.
Self-employed people do not automatically need a bigger deposit to get a mortgage.
A larger deposit can help in some situations, but it is not a rule just because you work for yourself. Lenders usually look at the whole application, including your income, trading history, credit profile, property value and the documents you can provide.
So, when it comes to your self-employed mortgage deposit, the real question is not simply “how much deposit do I need?” It is whether your deposit, income evidence and lender choice work together.
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So do self-employed people need a bigger mortgage deposit?
Not necessarily.
Being self-employed does not automatically mean you need a larger deposit than someone in employment. Many self-employed applicants can get a mortgage with a typical deposit, provided the rest of the application is strong enough.
Lenders mainly want to understand whether your income is stable, affordable and provable. This can be more detailed for self-employed applicants because income is not always as simple as a monthly payslip.
For example, a sole trader may be assessed using business profits. A limited company director may be assessed using salary and dividends, or salary plus a share of company net profit, depending on the lender.
The difference can be significant. HSBC, for example, currently uses salary plus the applicant’s share of average net profit after corporation tax, while Halifax can use salary and dividends or, in some cases, salary plus net profit.
This is why getting a mortgage when self-employed often comes down to finding a lender that understands your income properly, not just saving the biggest deposit possible.
Why deposit size matters to mortgage lenders
Your deposit affects your loan-to-value, often shortened to LTV.
Loan-to-value is the percentage of the property price you are borrowing from the lender.
For example:
Property price: £300,000
Deposit: £30,000
Mortgage: £270,000
Loan-to-value: 90%
A bigger self-employed mortgage deposit means a lower loan-to-value. This usually reduces the lender’s risk because they are lending a smaller share of the property value.
This can matter because lower loan-to-value borrowing may give you:
More lender options
More product options
Potentially better rates
More flexibility if your case has some complexity
But deposit size is only one part of the picture. A bigger deposit does not remove the need to prove your income or pass affordability checks.
Under FCA affordability rules, regulated mortgage lenders must assess affordability using evidence of income and expenditure. They cannot base the decision simply on the amount of equity you have in the property.
Can you get a self-employed mortgage with a 5% deposit?
A 5% deposit can be possible for self-employed applicants, subject to the lender’s product and underwriting criteria.
For example, Halifax currently accepts purchase applications above 90% up to 95% LTV, and its published criteria say its standard loan-to-income limits do not change just because an application includes self-employed income.
With a 5% deposit, you are usually borrowing 95% of the property value. This is higher risk for the lender, so the rest of the application becomes especially important.
A lender may look closely at:
How long you have been self-employed
Whether your income is steady or increasing
Your credit history
Your bank statements
How much you want to borrow compared with your income
Whether your documents support the income being used
For example, a sole trader with two or more years of accounts, steady profits and clean credit may have more options with a 5% deposit than someone with one year’s accounts and irregular income.
A 10% self-employed mortgage deposit may give you more options than a 5% deposit, because the lender is only lending 90% of the property value.
That can make the case more comfortable, especially if the income evidence is clear.
However, a 10% deposit does not make income checks disappear. You still need to show that the mortgage is affordable and that your earnings can be verified.
For example, if you are a limited company director, one lender may focus on salary and dividends, while another may be willing to consider a broader picture of your company income.
A 15% deposit self-employed mortgage may help if your application has some extra complexity.
For example, a bigger mortgage deposit can sometimes strengthen the application if you have:
Limited trading history
Fluctuating income
Only one year’s accounts
Credit issues or a weaker credit profile
A complex income structure
Higher borrowing compared with your income
A 15% deposit means you are usually borrowing 85% of the property value. This can make the risk feel lower for some lenders.
For example, someone with only one year of accounts and a 15% deposit may have more options than they would with a 5% deposit. But that does not mean approval is guaranteed.
The lender still needs to be comfortable with the income, affordability and documents.
A bigger deposit can help, but it does not fix every issue.
There are situations where saving more may not solve the underlying problem, such as:
Your income cannot be proven
The mortgage is not affordable based on the income lenders can use
You have recent serious credit issues
Your documents do not support the income figure
You are applying to a lender that does not suit your circumstances
For example, if you have £60,000 in mind as your income but the lender can only verify £35,000 under its criteria, it may base affordability on the lower figure. Even with a bigger deposit, the mortgage may not fit if the borrowing is too high.
This is why lender choice can matter as much as deposit size.
The wrong lender may decline a case that another lender would consider differently.
How deposit size works alongside income evidence
Lenders do not look at your self-employed mortgage deposit in isolation.
They look at how your deposit works alongside your income, documents and wider financial position.
In simple terms:
Deposit affects loan-to-value
Income affects affordability
Credit history affects risk
Documents prove the figures
Lender criteria decides how everything is assessed
Self-employed applicants may be asked for evidence such as accounts, SA302s, tax year overviews, business bank statements or company income details.
Company directors may also need to think about how salary, dividends and company profit are treated. This can make a limited company director mortgage slightly different from a sole trader application.
Should you wait and save a bigger deposit?
Sometimes waiting and saving more can help. But it is not always the best answer.
Saving a bigger deposit may reduce your loan-to-value and improve your options. It may also give you more time to build another year of accounts or strengthen your income evidence.
But waiting can also have trade-offs. Property prices, mortgage rates and personal circumstances can change.
For example:
A self-employed buyer with a 10% deposit, strong accounts and clean credit may not need to wait until they have 15%.
But someone with one year’s accounts, fluctuating income and a smaller deposit may benefit from reviewing their options before deciding whether to apply now or wait.
This is where advice can be useful. A broker can help you compare your current position against what may improve if you save more or wait for another tax year.
Getting help with a self-employed mortgage application
If you are self-employed and unsure whether your deposit is enough, the key is to look at the full picture.
Your deposit matters, but so does your income evidence, business structure, credit history, property price and choice of lender.
Monday Mortgages can help you understand which lenders may suit your income, documents and overall application.
If you are starting to look at self-employed mortgages, getting advice early can help you decide whether your current deposit is likely to be enough, or whether it may be better to strengthen your application first.
[FAQ]
Frequently asked questions
Can I get a self-employed mortgage with a 5% deposit?
Yes, it may be possible in some cases. However, the application usually needs to be strong. Lenders will look closely at your income evidence, credit history, affordability and the property you want to buy.
Is a 10% deposit enough if I’m self-employed?
A 10% deposit may be enough for some self-employed applicants. It depends on your lender, income evidence, credit profile and how much you need to borrow.
Does a bigger deposit make it easier to get a mortgage?
A bigger deposit can help because it reduces the lender’s risk. But it does not guarantee approval. You still need to show that the mortgage is affordable and that your income can be verified.
Do company directors need a bigger deposit?
Not automatically. Company directors may be assessed differently because lenders can use salary, dividends or company profit in different ways. But that does not automatically mean they need a larger deposit.
Can I get a mortgage with one year’s accounts and a bigger deposit?
Possibly. A bigger deposit can help, but lenders still need to be comfortable with your trading history, income evidence and affordability.
Should I save a bigger deposit before applying?
It depends on your current deposit, income, documents and target property price. Some applicants may already have enough deposit, while others may benefit from saving more or improving their evidence first.
Getting a mortgage as a limited company director can be more complex than applying as a standard employee. Your income may be split between salary, dividends, company profit and retained profit, and different lenders may treat each part differently.
That means limited company director mortgages are often less about whether you can afford the mortgage in real life, and more about how the lender chooses to assess your income on paper.
For some directors, this can reduce borrowing potential. For others, the right lender may take a more rounded view of the business, especially where profits are strong but not all income is withdrawn personally.
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Can limited company directors get a mortgage?
Yes, company directors can get mortgages. Many lenders are used to working with limited company directors, but the assessment is usually different from a standard employed application.
If you own a significant share of the company, lenders may treat you as self-employed for mortgage purposes. This means they’ll usually want to understand how the business performs, how you pay yourself and whether your income is sustainable.
The main issue is how income is evidenced. A director may have a profitable company but take a modest salary and dividends. If a lender only uses personal income, the application could look weaker than it really is.
This is why self-employed mortgage advice can be useful for directors who want to understand which lenders may take a more suitable view of their income.
How lenders assess salary and dividends
Many limited company directors pay themselves through a combination of salary and dividends. The salary may be relatively low, with dividends making up the rest of their personal income.
For a company director mortgage, lenders may look at:
Salary plus dividends
An average of the last two years’ income
The most recent year’s income
Whether income is rising, stable or falling
The director’s shareholding in the business
For example, a director may take a salary of £12,570 and dividends of £45,000. Some lenders may assess this as £57,570 of income. Others may look more closely at the company accounts to check whether the dividend level is sustainable.
If profits have dropped, a lender may use a lower figure or ask more questions. If profits are increasing, some lenders may still average income over two years, while others may be more flexible.
This is one reason it’s important to know how lenders calculate self-employed income. The same income can produce different borrowing outcomes depending on the lender’s criteria.
Can lenders use retained profit?
Retained profit is profit left in the company rather than taken out as salary or dividends. This can be important for limited company directors who keep money in the business for cash flow, growth, tax planning or future investment.
Some lenders may consider retained profit when assessing a mortgage for company directors. Others may only use salary and dividends.
For example, a director might take £40,000 personally but leave £80,000 profit in the company. A lender that only looks at salary and dividends may assess the application on £40,000. A lender that can consider retained profit may take a broader view, depending on the company accounts, shareholding and overall business position.
A retained profit mortgage is not a separate mortgage product. It simply refers to a mortgage application where retained company profit may be considered as part of the income assessment.
This can make a major difference, but it isn’t guaranteed. Not every lender accepts retained profit, and those that do may have specific rules.
What if you take a low salary from your company?
Many directors take a low salary and dividends for commercial or tax-efficiency reasons. This can work well for the business, but it may create problems when applying for a mortgage.
The issue is simple: the lender may only count what you’ve personally taken from the company. If you leave most of the profit inside the business, your mortgage affordability may look lower than your actual financial position.
For example, a director might run a business making £120,000 profit but only draw £50,000 in salary and dividends. If the lender only uses the £50,000 personal income, the director’s borrowing may be lower than expected.
This is where salary and dividends for a mortgage can become a key planning point. Directors often need to think about mortgage timing, income evidence and lender criteria before applying.
What documents do company directors usually need?
Limited company directors usually need more paperwork than employed applicants. The exact documents depend on the lender, but commonly include:
Accountant-prepared company accounts
SA302s and tax year overviews
Personal bank statements
Business bank statements, where relevant
Proof of salary and dividends
Accountant details or an accountant’s reference
ID, address history and proof of deposit
Some lenders may focus heavily on SA302s, while others may want to see full company accounts. If retained profit is being considered, the accounts will usually be especially important.
You may also be asked for SA302s for a mortgage, especially where a lender wants to verify declared income against HMRC records.
Limited company director mortgage examples
Scenario
Income position
Possible lender view
Low salary and dividends
£12,570 salary, £35,000 dividends
May assess income at £47,570
Profit left in the company
£40,000 personal income, £90,000 company profit
Some lenders may consider retained profit, others may not
Increasing company profits
£55,000 year one, £85,000 year two
Some lenders may average, others may use latest year
One year trading history
One full year of accounts
Options may be more limited, but some lenders may consider it
These are simplified examples. Actual borrowing will also depend on deposit size, credit history, debts, dependants, committed spending and the property itself.
Two lenders can look at the same director very differently.
One lender may use only salary and dividends. Another may consider net profit. Another may look at retained profit, but only if the director owns a certain share of the company or the business has a strong trading history.
This can affect how much you can borrow.
For example, if one lender assesses your income at £50,000 and another assesses it closer to £90,000, your borrowing potential could be very different. This doesn’t mean the highest figure is always the right route, but it does show why directors shouldn’t assume every lender will treat them the same way.
Getting mortgage advice as a limited company director
Limited company director mortgages can be straightforward, but only when the lender understands how your income works.
If your income is split between salary, dividends and company profit, Monday Mortgages can help you understand how different lenders may assess your mortgage application as a self-employed director.
This can be particularly useful if your personal drawings don’t reflect the true strength of the business, or if retained profit may be relevant to your affordability.
The goal isn’t just to find a lender that accepts company directors. It’s to find one that assesses your income in a way that fits your situation.
[FAQ]
FAQs
Are limited company directors classed as self-employed for mortgages?
Usually, yes. If you own a meaningful share of the company, many lenders will treat you as self-employed for mortgage purposes.
Do lenders use salary or dividends?
Many lenders use salary plus dividends. Some may also consider company profit or retained profit, depending on their criteria.
Can retained profit be used for a mortgage?
Sometimes. Some lenders may consider retained profit, but others won’t. It depends on the lender, the accounts and your shareholding.
How many years of accounts does a company director need?
Many lenders prefer two years of accounts, but some may consider one year if the wider application is strong.
Can I get a mortgage if I leave most profits in the company?
Potentially, yes. However, not every lender will count retained profit, so your borrowing may depend heavily on lender choice.
Self-employed mortgage borrowing can feel harder to estimate than employed borrowing, mainly because lenders do not look at income in quite the same way.
If you’re employed, a lender usually starts with your basic salary.
If you’re self-employed, the income figure can depend on how your business is set up. A sole trader may be assessed using net profit, while a limited company director may be assessed using salary and dividends or salary plus company net profit. Contractors can also be assessed differently depending on the lender.
That means your self-employed borrowing power is not based on turnover alone. It depends on what income you can prove, how stable that income looks, your deposit, monthly commitments, credit history and the lender’s own criteria.
Most lenders want to understand two things: how much you earn and how affordable the mortgage is likely to be.
Here are the main factors that can affect your borrowing amount:
Factor
Why it matters
Income evidence
Lenders need to see what income they can use for affordability.
Business structure
Sole traders, partners, contractors and company directors can be assessed differently.
Deposit size
A bigger deposit can reduce lender risk and improve options.
Loan-to-value
Lower loan-to-value mortgages may open up more lender choices.
Debts and commitments
Loans, credit cards and car finance can reduce borrowing.
Dependants
Children or other dependants can affect affordability calculations.
Credit history
Missed payments, defaults or CCJs can limit lender options.
Joint application
A second income can improve affordability, but both incomes need to be assessed.
A simple income multiple can give a rough starting point, but it should not be treated as a guaranteed borrowing figure.
How lenders assess self-employed income
Lenders usually focus on provable income rather than business revenue.
For example, if you’re a sole trader and your business turns over £90,000 but your net profit is £40,000, the lender is more likely to assess the £40,000 net-profit figure than the turnover. Limited company directors can be assessed differently because the lender may use salary, dividends or company profit depending on its criteria.
How your income is assessed depends on your setup:
Business type
Income lenders may look at
Sole trader
Net profit, usually from tax calculations and accounts
Partnership
Your share of partnership profit
Limited company director
Salary and dividends at some lenders; salary plus company net profit at others
Contractor
Day rate, contract history, accounts or payslips, depending on the lender
Income multiples such as 4x or 4.5x can be useful for a rough illustration, but there is no single maximum across all lenders. Some lenders offer higher multiples to eligible borrowers.
For example, a sole trader with £40,000 net profit might assume a rough borrowing range based on income multiples:
Income used
Example multiple
Rough borrowing estimate
£40,000
4x
£160,000
£40,000
4.5x
£180,000
£40,000
5x
£200,000
These figures are only examples. The actual amount could be lower or higher depending on deposit, debts, credit profile, household costs and lender criteria.
Under FCA affordability rules, a lender can use an income multiple as part of its approach, but it must still be able to show that the mortgage is affordable after taking account of income, expenditure and likely future interest-rate increases.
Higher multiples do exist in some circumstances. Nationwide, for example, currently says eligible self-employed borrowers can access some of its higher loan-to-income routes at up to 6x income.
This is why self-employed mortgage affordability is not just about what you earn. It is about what the lender believes you can comfortably repay.
How deposit size affects borrowing options
Your deposit affects the loan-to-value, often shortened to LTV. This is the percentage of the property price you need to borrow.
For example:
Property price
Deposit
Mortgage needed
Loan-to-value
£250,000
£25,000
£225,000
90%
£250,000
£50,000
£200,000
80%
£250,000
£75,000
£175,000
70%
A larger deposit does not automatically mean a lender will let you borrow more based on income. However, it can improve your choice of lenders and deals because the mortgage is lower risk.
For self-employed applicants, that can matter. If your income is more complex, having a stronger deposit may give you more room to work with.
Why debts, dependants and spending matter
Two self-employed applicants with the same income may not be able to borrow the same amount.
For example, one person earning £50,000 with no debts and no dependants may be assessed differently from someone earning £50,000 with car finance, credit card balances and childcare costs.
Lenders may factor in:
Personal loans
Credit cards
Car finance
Childcare costs
Maintenance payments
School fees
Other regular financial commitments
This can reduce your self-employed borrowing power because the lender is checking whether the mortgage is affordable alongside your existing costs.
Self-employed mortgage borrowing examples
1. Sole trader earning £40,000 net profit
A sole trader with £40,000 net profit may be assessed on that figure rather than turnover. If they have a clean credit history, low debts and a reasonable deposit, they may have a good range of lender options.
But if the same applicant has large monthly commitments, their borrowing could be reduced even though the income is the same.
2. Limited company director taking salary and dividends
A company director might take a £12,000 salary and £35,000 in dividends. Some lenders may use salary and dividends, while others can use salary plus company net profit instead.
HSBC, for example, currently uses salary plus the applicant’s share of average net profit after corporation tax, while Halifax can use salary and dividends or, in some cases, salary plus net profit.
This is where a limited company director mortgage can become more nuanced. The same business could produce different borrowing results with different lenders.
3. Joint application with one employed and one self-employed applicant
A joint application can help if one person is employed and the other is self-employed.
For example, if one applicant earns a £38,000 salary and the other has £32,000 self-employed income, a lender may assess the combined income. However, the self-employed income still needs to be evidenced properly.
A joint application does not remove the need for clear accounts, tax calculations or income proof.
Why different lenders may give different answers
Self-employed applicants often get different borrowing figures from different lenders because criteria vary.
One lender may consider an applicant with one year’s accounts, while another may require two years of figures. Lenders also differ in how they treat changing income.
Halifax and HSBC, for example, currently use the lower of the latest year or a two-year average in relevant self-employed cases, so a higher latest year is not automatically used in full.
Lenders can also differ on:
Recently increased profits
Salary and dividends
Company profit
Contractor income
Short trading history
Complex business structures
Credit commitments
Past credit issues
So, if one lender gives a lower figure than expected, it does not always mean every lender will take the same view.
Using a self-employed mortgage calculator
A calculator can be a useful starting point if you want a rough idea of how much you may be able to borrow.
It can help you estimate borrowing based on income, deposit and basic affordability assumptions. This is useful before viewing properties, setting a budget or deciding whether to speak to a broker.
For a rough starting point, try our self-employed mortgage calculator to estimate how much you may be able to borrow based on your income and deposit.
Just remember that a calculator is not a lender decision. It cannot fully account for every lender’s criteria, your documents, your business structure or the way your income will be assessed.
When to get mortgage advice
Mortgage advice can be useful if your income is not straightforward or you want to understand your realistic options before applying.
This may be worth considering if:
You only have one year’s accounts
Your income has recently increased
Your income has recently dropped
You’re a limited company director
You leave profit in the business
You’re applying jointly
You have debts or credit issues
You want to compare lender approaches
A broker can help sense-check your self-employed mortgage affordability, identify lenders that are more likely to understand your income, and avoid applications that are unlikely to fit.
For more tailored help, you can read more about self-employed mortgages and how the application process works.
[FAQ]
Self-employed mortgage borrowing FAQs
Can I borrow 4.5 times my self-employed income?
Possibly, but it is not guaranteed. Some lenders may use income multiples around this level, but affordability checks, deposit size, credit history and monthly commitments all affect the final figure.
Do lenders use turnover or profit?
For sole traders, lenders commonly assess net profit rather than turnover. Limited company directors can be assessed differently: some lenders use salary and dividends, while others may use salary plus company net profit.
Can I get a bigger mortgage if my income has gone up?
Potentially, but a higher latest year is not automatically used in full. Some lenders average recent years or use the lower of the latest year and the average, while others have different criteria. The lender may also consider whether the higher income appears sustainable.
Does a bigger deposit help if I’m self-employed?
Yes, it can help. A bigger deposit reduces loan-to-value, which can improve lender options. It does not guarantee higher borrowing, but it can make the overall application stronger.
Can I apply jointly if one person is self-employed?
Yes. Many borrowers apply jointly where one person is employed and the other is self-employed. The lender will still need to assess both incomes properly.
Is a self-employed mortgage calculator accurate?
It can give a useful estimate, but it should be treated as a starting point. Your actual borrowing amount depends on lender criteria, income evidence, deposit, debts and overall affordability.
Getting a mortgage with one year’s accounts can be more challenging than applying with two or three years of self-employed income history, but it does not always make a mortgage impossible.
Some lenders prefer a longer trading record, while others may consider one year’s accounts if the rest of your application is strong. That means your deposit, credit history, previous work experience, income stability and supporting documents can all make a difference.
The key point is that this is not just about affordability. It is about finding a lender whose criteria fit your situation.
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Can you get a mortgage with one year’s accounts?
Yes, you may be able to get a mortgage with one year’s accounts, but your options are likely to be more limited.
Many lenders are more comfortable when self-employed applicants have at least two years of accounts because it gives them more evidence of stable income. However, some lenders may consider one year if they can see that your income is reliable and likely to continue.
This can be more realistic if you have:
A strong deposit
Clean credit history
Low personal debt
Previous employment in the same industry
Accountant-prepared accounts
Stable or growing income
Clear business and personal bank statements
For example, someone who worked as an employed electrician for eight years, then became self-employed and earned a similar income in their first year, may be easier for some lenders to assess than someone who has started a completely new business with no trading history.
Why do many lenders prefer two years of accounts?
Lenders want to understand whether your income is sustainable.
With employed applicants, payslips and a contract can usually show current earnings clearly. With self-employed applicants, income can move up and down depending on trading conditions, business costs, seasonality and client demand.
Two years of accounts gives lenders more evidence. They can see whether income is stable, increasing or falling. They can also compare your latest year against previous earnings.
With only one year’s accounts, the lender has less history to work with. A strong first year is helpful, but some lenders may still ask whether that level of income is likely to continue.
This is why a self-employed mortgage with one year’s accounts often depends on the wider application, not just the headline profit figure.
A mortgage with one year’s accounts may be more achievable when there is a clear reason for the lender to trust the income.
This is often the case when your self-employed work is closely linked to your previous career. If you were previously employed in the same role or industry, the lender may see your self-employment as a continuation of your earning history rather than a completely new risk.
A stronger case may include:
Previous PAYE employment in the same sector
Similar or higher income since becoming self-employed
A good deposit, such as 15% or more
No recent missed payments, defaults or CCJs
Finalised accounts prepared by an accountant
Regular business income shown on bank statements
Existing contracts or repeat clients
Contractors can sometimes be in a stronger position too. For example, an IT contractor with a current contract, a strong day rate and several years of previous IT experience may have more options than someone with a new business and irregular income.
This is where self-employed mortgage advice can help, because different lenders look at these cases in different ways.
When might it be better to wait?
Applying immediately is not always the best option.
It may be better to wait before applying for a mortgage with one year’s accounts if your income evidence is weak or your next set of figures is likely to put you in a stronger position.
Waiting may be sensible if:
Your first-year income was low
Your income is irregular or falling
Your accounts are not yet finalised
You have a small deposit
You have recent credit issues
You need to borrow close to the maximum possible amount
Your second year is likely to show stronger income
For example, if your first year of trading shows £28,000 profit but your second year is on track for £45,000, waiting until the second year is finalised may improve your lender choice and borrowing potential.
This does not mean you should always wait. It means the timing of your application matters.
What documents might you need with one year’s accounts?
For a mortgage with one year’s accounts, lenders may want more supporting evidence than they would from an employed applicant.
Evidence of previous employment or industry experience
Some lenders may place more weight on your SA302 and tax year overview. Others may look closely at bank statements, retained profit, contracts or accountant references.
Examples of one-year accounts mortgage applications
First-year sole trader with strong previous PAYE history
A graphic designer was employed for six years, then became a sole trader 13 months ago. Their first-year accounts show £48,000 net profit. They have a 15% deposit, clean credit history and regular income from long-term clients.
This may be a stronger case because the applicant has clear industry experience and their self-employed income is linked to their previous career.
Contractor with a current contract
An IT contractor has been self-employed for one year. They have a current 12-month contract at £450 per day and previously worked in permanent IT roles for several years.
Some lenders may consider this type of one year self-employed mortgage application because the contract gives additional evidence of current income.
New business owner with high income but limited evidence
A new business owner has earned £90,000 in their first year, but the income came from a few irregular payments. The accounts are not yet finalised and business bank statements show uneven cash flow.
Despite the high income, this may be harder for a lender to assess. The issue is not only how much the applicant earned, but whether that income looks repeatable.
Why lender choice matters
Not all lenders treat self-employed applicants the same way.
Some have strict rules and will not consider an mortgage applicant with only one year’s accounts. Others may be more flexible if the application is strong and well documented.
This matters because applying to the wrong lender can create avoidable problems. You could lose time, face unnecessary stress or end up with a declined application that might have been avoided with a better lender match.
A broker can help by looking at your situation before you apply and identifying lenders that may consider your trading history, income structure and supporting evidence.
This is especially important with a recently self-employed mortgage application, where the details can matter more than the headline income figure.
Getting help with a mortgage after one year trading
If you only have one year’s accounts, Monday Mortgages can help you understand whether it may be worth applying now or whether waiting could put you in a stronger position.
This is not about pushing every applicant to apply immediately. In some cases, applying now may make sense. In others, waiting for stronger accounts, a bigger deposit or cleaner bank statements could improve your options.
You can also use our self-employed mortgage calculator to estimate how much you could borrow, but treat this as a rough guide only. A calculator result does not prove that a lender will accept your income or approve your application.
For tailored support, visit our self-employed mortgages page or speak to us about getting a mortgage when self-employed.
[FAQ]
Frequently asked questions
Can I get a mortgage after one year self-employed?
Yes, it may be possible, but lender choice is usually more limited. Your chances may improve if you have strong income evidence, clean credit, a good deposit and previous experience in the same industry.
Do all lenders need two years of accounts?
No. Many lenders prefer two years, but not all of them require it in every case. Some may consider a mortgage with one year’s accounts depending on the strength of the application.
Is one year’s SA302 enough for a mortgage?
It may be enough for some lenders, but usually not on its own. You may also need accounts, tax year overviews, bank statements and other supporting documents.
Does a bigger deposit help with one year’s accounts?
Yes, a bigger deposit can help because it reduces the lender’s risk. However, it does not guarantee approval.
Can contractors get a mortgage with one year of accounts?
Some contractors may have options, especially if they have a current contract, strong day rate and previous experience in the same field.
Should I wait until I have two years of accounts?
Sometimes. If your evidence is weak or your next year’s figures are likely to be stronger, waiting could improve your lender choice and borrowing potential.
