Joint Borrower Sole Proprietor Mortgage

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Joint Borrower Sole Proprietor Mortgage

Joint Borrower Sole Proprietor Mortgage

Kelly talks to us about a Joint Borrower Sole Proprietor mortgage.

What is a Joint Borrower Sole Proprietor (JBSP) Mortgage and how do they work?

It’s a mortgage in which all applicants to mortgage are assessed in terms of affordability however, only the proprietor of the property will be named on the mortgage deeds. So although it’s based on joint income and affordability, only the person or people living in the property are named on the legal title of the property and therefore are the sole owners.

What criteria do you need to meet for a JBSP mortgage and who is eligible?

Anybody is eligible for this type of mortgage. In terms of how it works, let’s imagine a young couple who want to buy a property. Currently their income and affordability doesn’t quite meet the mortgage they need to buy the house they want. But potentially, knowing that their pay increases year on year and that things will improve in the future, we can add a parent or a grandparent onto the mortgage as a joint borrower. We can then use their income to help with affordability. 

That person would not be named on the property deeds and would not be living in the property. The family member is just there to help affordability, to get the mortgage that the person needs.

Do you have to pay stamp duty on a JBSP mortgage?

Stamp duty is only based on the proprietor of the property. If you’re a First Time Buyer and the property value is under the stamp duty threshold, you won’t pay any stamp duty. So that’s one of the really good selling points of a Joint Borrower Sole Proprietor mortgage. This is exactly why this kind of product is around.

 Previously, if mum and dad wanted to help their son or daughter get on the property ladder with a joint mortgage, typically everybody would have to be named on the mortgage deeds. 

If you own property elsewhere, that means you would pay stamp duty at a higher rate. A JBSP mortgage was brought out to address that. If you’re not a proprietor of the property and are simply helping with affordability, you don’t have to pay that added stamp duty. 

What’s the difference between a joint mortgage and a JBSP mortgage?

If we apply for a simple joint mortgage – for example if a daughter and mum are both named on a joint mortgage and one of them owns another property, they’re automatically going to pay more stamp duty. If you own more than one property there is a surcharge. To then remove the joint borrower at a later date, there are fees involved at that point also as all borrowers are legal owners of the property.

The idea of a JBSP mortgage is that it helps people buy a property who aren’t quite ready to get a long term mortgage on their own. The second person just joins the mortgage to boost affordability. They aren’t named on the property deeds and therefore that added stamp duty doesn’t apply.

What’s the difference between a guarantor mortgage and a JBSP mortgage?

A guarantor mortgage works slightly differently. When lenders are assessing affordability and how much they will lend to people, a guarantor usually helps towards the deposit rather than helping towards affordability. They may have an amount in savings that can be used if the son or daughter doesn’t keep on top of the mortgage. They allow the lender to take control of that money – guaranteeing that this person is going to pay their mortgage. 

With a Joint Borrower Sole Proprietor mortgage, it’s down to affordability. Mum and dad’s income will be factored in when assessing how much you can afford on that mortgage but they don’t necessarily have to provide a lump sum of money as a guarantee.

Can I get a JBSP mortgage with bad credit?

Bad credit in any mortgage scenario can limit the number of lenders we can approach. It does depend on the kind of bad credit it is – with defaults, CCJs or anything like that, some lenders won’t accept you regardless if we are applying for a JBSP or a standard mortgage. 

Only a handful of lenders will offer a JBSP mortgage currenlty, and if you add bad credit into the mix the pool is even more limited. But some lenders will allow it, it’s just a case of knowing what’s on your credit report and how that affects being able to get the borrowing you need.

How does remortgaging a JBSP mortgage work?

It would be a standard remortgage, because the person named as a joint borrower is there to help with affordability. They’re not on the deeds so there’s no transfer of equity. Taking someone off the deeds is what tends to cost more money and can sometimes cause issues.

If, at the point of remortgage you can afford a mortgage on your own without the joint borrower’s income, it’s a straightforward re-mortgage in that person’s sole name. That’s exactly the idea of a JBSP mortgage.

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What are the pros and cons of JBSP mortgages?

The biggest disadvantage is that fewer lenders are able to offer this kind of mortgage, although more and more are coming on board with it. Because of that, we don’t have access to all the interest rates in this scenario. 

Also, the term of the mortgage is usually based on the older person’s age. Imagine mum or dad are helping a son or daughter onto the property ladder and they’re aged 55. The mortgage is based on their planned retirement age, rather than the younger person’s age.

You might only be able to get a 15 year mortgage,  which means that the monthly payments are higher than they’d be on a 25 year deal. 

On the positive side, we have seen this work really well in scenarios where somebody’s just starting out in a career and their income is going to increase year on year. Having another person’s income to boost affordability can really help in the short term – two or five years, for example. It helps people get on the ladder, especially in the current climate [podcast recorded in December 2023].

How can a mortgage broker help with a Joint Borrower Sole Proprietor mortgage?

In the current climate, any kind of mortgage application can be helped by a mortgage broker. We make sure you get the right product and personalised advice across the whole of the market. 

A JBSP is quite a specialist kind of product and not every lender will offer them. It’s something that people often don’t know a lot about. Having a mortgage broker to ask questions of is absolutely paramount to really make sure that this is the right thing for you. 

It’s about exploring all the options and what happens later on in life. In two or five years time, how do we remortgage out of this? We’re there to answer all those questions. 

What advice would you give to anyone going through this process right now?

Firstly, to instruct a really good solicitor. The lenders will make sure that the joint borrower who is helping with affordability has their own legal advice. Although this person isn’t being named on the deeds of the property, they are still legally liable to pay that mortgage. If the other person for whatever reason can’t pay, you are jointly responsible for that. 

Having a mortgage broker to advise on this kind of product and how it works and the pros and the cons is important. But you also need a solicitor to make sure that legally each person knows where they stand with it.

Please note: Your home may be repossessed if you do not keep up with your mortgage repayments.