Joint Borrower Sole Proprietor Mortgage
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A Joint Borrower Sole Proprietor mortgage can be a useful option to help First Time Buyers buy a property. We look at how it works and what to consider.
What is a JBSP Mortgage?
For most mortgages, banks and building societies expect the mortgage applicants to be named on the property deeds. With a joint mortgage, both borrowers are the legal homeowners. This protects the bank or building society should they ever need to repossess the property.
A Joint Borrower Sole Proprietor (JBSP) mortgage instead makes it possible to have different names on the mortgage and property documents. That way, a parent or other family member can add their income to a mortgage assessment, without becoming the legal owner of the property.
How do JBSP mortgages work?
To get a mortgage, you need to prove your income to a lender, who will then calculate how much you can borrow based on affordability.
A JBSP mortgage allows you to boost your borrowing capacity by including a second person’s income in your application. Some lenders even allow up to four people on a JBSP mortgage.
As an example, if you are earning £20,000 you may be offered a mortgage of £80,000 (four times your income). This may not be enough to afford a property in your local area. If your parent joins the mortgage and they earn £40,000, you could borrow four times £60,000, or £240,000, which will greatly increase your property budget.
The most important thing is, however, that you can keep up the repayments on the mortgage you choose. Later on in the mortgage term, you may decide to take out a standard mortgage, once your income meets affordability requirements.
What criteria do I need to meet for a JBSP mortgage?
A key part of the criteria is that the joint borrower – the person supporting the mortgage application – should be a relative. The usual situation is for a son or daughter to get the mortgage together with a parent or step-parent.
As the property buyer, most people are eligible for a JBSP mortgage as long as they don’t own any other properties. You do not have to be a First Time Buyer. Lenders will also look at your credit history for any previous debt issues.
Do you pay stamp duty on a joint borrower sole proprietor mortgage?
For a First Time Buyer there is no stamp duty on properties worth up to £300,000. But if you already own a property, you will need to pay this duty – and at a higher rate for a second property.
This is the key advantage of a JBSP mortgage. Because the parent isn’t named on the deeds, they have no stamp duty liability. And, as long as the buyer has not bought before, and the property costs less than £300,000, they won’t have to pay any duty at all.
Can you have a sole mortgage on a joint property?
In this situation, one person is responsible for the mortgage but two people are named on the deeds. This is a fairly unusual situation and lenders generally don’t allow it. Usually, both property owners need to be named on the mortgage. If this is something you want to do, contact us and we will research the options.
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What’s the difference between a joint mortgage and a JBSP mortgage?
A joint mortgage is the ‘standard’ way that a couple typically buys a home. Both applicants are named on the mortgage and the deeds, and are jointly responsible for repaying the mortgage debt.
With a Joint Borrower Sole Proprietor mortgage, two people are named on the mortgage but only one of them legally owns the property.
The risk with this kind of mortgage is that the parent is on the hook for repaying the debt, but has no ownership of the property. Because of that, most lenders will require that the parent takes legal advice about borrowing for an asset they won’t own. They have to confirm that they’ve had legal instruction in writing.
What’s the difference between a guarantor mortgage and a JBSP mortgage?
In essence, JBSP mortgages are a new form of guarantor mortgage. Guarantor mortgages are not commonly available today. Both are designed to allow someone to support their family member to buy a home, but the JBSP is preferable to most parents because it removes the stamp duty liability.
How can I get a Joint Borrower Sole Proprietor mortgage?
This is a niche and specialist area. It is really important to get advice about this type of mortgage. As mortgage brokers, we understand which banks offer this type of arrangement and the pros and cons to consider.
As a route to getting on the property ladder, a JBSP mortgage can be an excellent tool, as long as everyone fully understands what’s involved.
We’ll explore your options and make recommendations about the most suitable way to achieve your goals. We are fully authorised and regulated by the Financial Conduct Authority, so contact us today for an initial chat about your options.
Your property may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
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