Why does my mortgage shrink when my accountant saves me tax?

Because both numbers come from the same line. Your qualifying income is profit after deductions, so an extra 10,000 of expenses is 10,000 less income in the lender's eyes. At a 45% debt-to-income ratio over 30 years at 6.5%, that costs roughly 59,000 of borrowing while saving about 3,000 in tax at a 30% marginal rate: around twenty units of mortgage for every one of tax. If you are buying next year, that is a bad trade. If you are buying in five, it is free money.

Do lenders really only count net profit?

Mostly, but not entirely. Underwriters add back some paper costs, depreciation being the common one, and may average two years rather than take the latest. What they do not do is count revenue, and they do not care that a deduction was optional. We model the strict version on purpose: if the number works here, the add-backs are upside.

What does a shorter trading history actually change?

Price and paperwork, mostly. Under two years you are into specialist lending, which usually means a bigger deposit, a higher rate, and an underwriter reading your accounts by hand rather than a scorecard. It is not a refusal, and one full year plus a documented history in the same line of work is the exception most guidelines already allow for.

Personal finance

Self-employed mortgage affordability calculator

A lender does not look at what you invoiced. It looks at the profit left after every deduction you claimed, which is the number you spent all year making smaller. This works out what that profit borrows in the US, Spain or the UK, and then prices the awkward part: every extra deduction saves tax now and takes borrowing away for as long as the lender looks back. Indicative only, and never a lending decision.

Where you are buying

Net profit for the year

Profit after deductions: Schedule C line 31, the base of your IRPF return, or the profit on your accounts.

Full years of accounts

How many complete years you can show. Most lenders want two.

Other debt payments a month

Cards, car, student loans: everything a lender will see on your file.

Deposit saved

Cash for the down payment, before fees and taxes on the purchase.

Interest rate

Use the rate you have been quoted. The default is a starting point, not a quote.

Term in years

Longer terms buy a bigger loan and cost far more interest.

Deduction you are weighing

The extra expense or contribution you are thinking of claiming this year.

Marginal tax rate

The rate the deduction actually saves at, income tax and self-employment tax together.

What the profit borrows

Indicative loan$454,856

Price you could reach: $514,856
Monthly payment at that loan: $2,875
Monthly income the lender uses: $7,500

What the deduction costs you

Same expense, two prices: the tax it saves this year, and the borrowing it removes while the lender is looking at that year.

Borrowing lost per unit of tax saved: 19.8x
Tax saved this year: $3,000
Borrowing lost: $59,329

Above one, the deduction costs you more mortgage than it saves tax. That is the trade, and it is only worth taking when you are buying soon.

The rule set being applied

Share of income for all debt: 45%
Maximum loan to value: 95%
Years of accounts expected: 2

Source for this rule set Checked 2026-08-23

Estimate

workingfigures.com/calculators/self-employed-mortgage-calculator

Formula

United States and Spain: monthly payment = net profit / 12 x debt share, minus existing debt payments; loan = payment x (1 - (1 + i)^-n) / i, where i is the monthly rate and n the months. United Kingdom: loan = (net profit - existing debt payments x 12) x 4.5. Either way the loan is then capped by the deposit at the country's loan-to-value ceiling: loan <= deposit x ltv / (1 - ltv). The deduction line reruns the whole thing on a profit that is lower by the deduction, and reports the difference.

Assumptions

Rule sets checked 2026-08-23. United States: 45% total debt-to-income, the Fannie Mae manual underwriting ceiling (Desktop Underwriter allows up to 50%), 95% loan to value, two years of self-employment. Spain: 35% of net income, the middle of the 30% to 35% band lenders apply and the Banco de España consumer portal describes as prudent, 80% loan to value. United Kingdom: 4.5 times income, the practical ceiling created by the loan-to-income flow limit, 90% loan to value. Not modelled: credit scoring, stress tests at a higher rate, add-backs such as depreciation, joint applicants, buy-to-let rules, purchase taxes and fees. Lender criteria move fast, and the UK limit was under consultation in 2026, so treat this as a planning tool and get a decision in principle before you offer on anything.

FAQ

Why does my mortgage shrink when my accountant saves me tax?: Because both numbers come from the same line. Your qualifying income is profit after deductions, so an extra 10,000 of expenses is 10,000 less income in the lender's eyes. At a 45% debt-to-income ratio over 30 years at 6.5%, that costs roughly 59,000 of borrowing while saving about 3,000 in tax at a 30% marginal rate: around twenty units of mortgage for every one of tax. If you are buying next year, that is a bad trade. If you are buying in five, it is free money.
Do lenders really only count net profit?: Mostly, but not entirely. Underwriters add back some paper costs, depreciation being the common one, and may average two years rather than take the latest. What they do not do is count revenue, and they do not care that a deduction was optional. We model the strict version on purpose: if the number works here, the add-backs are upside.
What does a shorter trading history actually change?: Price and paperwork, mostly. Under two years you are into specialist lending, which usually means a bigger deposit, a higher rate, and an underwriter reading your accounts by hand rather than a scorecard. It is not a refusal, and one full year plus a documented history in the same line of work is the exception most guidelines already allow for.