If you’re a young adult or low-income earner with family members or friends willing to help you financially, a joint borrower sole proprietor (JBSP) mortgage can help you get on the property ladder.
If you want to buy a property with the help of other people and retain sole ownership, read on to learn more about joint borrower sole proprietor mortgages in the UK.
What Is A Joint Borrower Sole Proprietor Mortgage?
A JBSP mortgage allows you to share mortgage repayment responsibilities with one or more sponsors or additional borrowers, usually parents or close family members.
It enables multiple people to buy a property together, but only one person maintains ownership.
You can maximise your buying potential with a JBSP mortgage by using all parties’ combined income while maintaining 100% home ownership.
The other parties are not named on the title deed and have no legal claim over the property or any increase in its value.
JBSP mortgages allow people to help someone they care about buy a home or get a bigger and better property.
They’re suitable for young people who would otherwise need to save for many years to buy a house and can also be useful in helping elderly parents secure a mortgage with support from their children.
How Does A Joint Borrower Sole Proprietor Mortgage Work?
Although only one person owns the property, everyone on the mortgage is responsible for keeping up with repayments.
Some aspects of JBSP mortgages are similar to standard mortgages.
All borrowers are assessed, and their income and expenses are considered to determine affordability.
You can incorporate up to four applicants on a JBSP mortgage for a single property.
The more closely you all fit the lender’s eligibility criteria, the more generous they’ll be on their offer.
Such criteria can include income, creditworthiness and age limits like applicants not being over 70 or 80 at the end of the term.
While some lenders don’t have restrictions on who you can get a JBSP mortgage with, most require helpers to be family members.
This ensures you trust each other and have each other’s back since a JBSP mortgage involves joint liability.
If one of you can’t repay, the others are liable for covering the whole amount.
Therefore, ensure you only apply for a JBSP mortgage with someone you trust and who has excellent financial standing.
How Does A JBSP Mortgage Differ From A Joint Mortgage?
The critical difference is that, unlike joint mortgages, not all applicants on a JBSP mortgage will have ownership rights.
With joint mortgages, the applicants who get the mortgage own it together, and if the property is sold, the equity gets split between everyone.
With joint borrower sole proprietor mortgages, the other parties accept responsibility for repayments but have no legal claim to the property.
Only one person is listed on the title deed, meaning the people helping you with the mortgage will not get any money if you sell the property.
They can also avoid stamp duty surcharges on second properties.
How Does A JBSP Mortgage Differ From A Guarantor Mortgage?
JBSP and guarantor mortgages allow family members and parents to help someone get on the property ladder without legally owning the property.
However, unlike joint borrower sole proprietor mortgages, where all applicants agree to contribute to mortgage repayments from the beginning, guarantors only become liable when you cannot keep up with repayments.
With guarantor mortgages, your family member or parent is only there as a plan B to convince the lender if you have shortcomings like credit issues or a small deposit and give them peace of mind in case anything goes wrong.
Advantages and Disadvantages of Joint Borrower Sole Proprietor Mortgages
- Access To Better Deals
With help from other applicants, you’ll have a higher income and deposit, allowing you to access better and cheaper deals than you otherwise would.
You also have access to a better choice of properties.
Since you’ll be the sole owner of the property, you can do what you want without asking for permission from co-applicants.
As your salary or income increases, the other parties can gradually reduce their repayments and allow you to take full responsibility for the mortgage.
- Additional Borrowers Can Avoid Stamp Duty
Additional 3% stamp duty surcharges are usually levied on second properties.
However, since the family member or parent helping you with the mortgage doesn’t have ownership rights on the property, they won’t have to pay any stamp duty or capital gains tax.
- Get a Mortgage With a Bad or No Credit History
If you have low credit scores or are yet to build up enough credit history, applying with others can be an excellent option to get approved quickly.
You can convince lenders by teaming up with someone with a good credit history and years of experience repaying loans on time.
- All Applicants Face Credit Risks
All applicants will be affected equally by defaults, penalties incurred or missed payments.
Since everyone is jointly and severally liable, all your credit histories will be affected if no one makes the monthly repayment.
- Lack of Ownership
Being responsible for repayments but not having any rights or equity on the property isn’t an attractive offer for everyone, especially if the owner makes irresponsible decisions about the property.
Money can easily cause arguments and put a strain on relationships.
- Age Limits
JBSP mortgage deals come with age limits on when the loan should be repaid, making it challenging to qualify if potential sponsors or parents fall outside the accepted age range.
Even if you choose a shorter term to accommodate advanced ages, it will likely come with higher repayments.
How Much Can You Borrow With A JBSP Mortgage?
Similar to standard mortgages, lenders allow you to borrow up to 4.5 times your income with JBSP mortgages.
However, you’ll be able to combine your incomes and borrow more.
For example, if you earn £15,000, you can only borrow £67,500 (£15,000 x 4.5) alone.
Assuming you and the co-applicants earn £30,000 combined, you can borrow £135,000 with a JBSP mortgage.
Joint Borrower Sole Proprietor Mortgage Final Thoughts
Joint borrower sole proprietor mortgages are niche products not offered by most lenders.
Consulting a qualified mortgage adviser can ensure you get access to direct lenders offering JBSP mortgages, bespoke guidance suitable for your situation and help in the application process.
Call us today on 01925 906 210 or contact us. One of our advisors can talk through all of your options with you.