Joint Borrower Sole Proprietor Mortgage

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Joint Borrower Sole Proprietor Mortgage

Joint Borrower Sole Proprietor Mortgage

Jon Cole talks us through a Joint Borrower Sole Proprietor mortgage and how they can help people buy a home.

What is a Joint Borrower Sole Proprietor (JBSP) mortgage? How do they work?

A Joint Borrower Sole Proprietor mortgage allows up to four people to buy a home together, with just one person owning the property. It’s often used by parents who want to help their children get on the property ladder, but it may also be used by siblings or friends.

They use their combined income to buy a home, but just one of them will live there. All borrowers have joint responsibility for the mortgage payments, which lowers the risk for the lender.

But that joint liability also means that if you cannot make the repayments, the others are liable to cover that whole mortgage amount between them. So you should only take out a Joint Borrower Sole Proprietor mortgage with someone you trust and whose financial affairs you understand.

The mortgage holders are not named on the title deeds and have no legal claim over the property or any increase in its value.

This type of mortgage allows people to help someone they care about to buy a home, or get a bigger or better property. When the initial deal period ends and the early repayment charges no longer apply, the owner can then switch to a mortgage in their name only.

What criteria do you need to meet for a Joint Borrower Sole Proprietor mortgage?

It’s similar to a standard mortgage. All borrowers are scrutinised by the lenders, with expenses and income taken into account to measure affordability.

The borrowers must meet the lender’s criteria, including income and credit worthiness. But most people will be eligible for a JBSP subject to criteria.

Speak To an Expert

Come on in and be quite forward with what you’re after – just be very honest with your mortgage broker. It’s good to make sure that we know absolutely everything about you. That way we can’t be blindsided by a lender. An open book policy is very good when coming to see your mortgage broker. 

Do you pay stamp duty on a JBSP mortgage?

The sponsor helping the borrower may already have a home, with or without a mortgage. There’ll be no stamp duty implication for the sponsor. Any stamp duty will be applicable only to the buyer, depending whether the property is above the stamp duty thresholds.

I’d recommend that you always speak to a solicitor regarding any stamp duty requirements.

Can you have a sole mortgage on a joint property?

I think this relates to a Sole Borrower Joint Proprietor type mortgage – and it’s really difficult. Generally no, you can’t, but potentially it could be done in very exceptional circumstances.

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

The other person or persons would not live in the property with a JBSP. If the sponsor were to live in the property, you will be limited even further by lenders. That’s the main difference.

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

They’re actually very similar. A guarantor mortgage could be where somebody wanted to help a loved one or friend buy a property. Generally the lender will want to see that they have collateral in their own property.

Or, they could buy with a guarantor or sponsor but they may be restricted by certain specified conditions.

Can I get a Joint Borrower Sole Proprietor mortgage with bad credit?

Just like purchasing with a standard mortgage, different lenders would look at bad and adverse credit differently. Many lenders offer JBSP mortgages, so we would source the right lender to take into account your situation.

How does remortgaging a JBSP mortgage work?

Having done a lot of JBSPs over the years, the first thing I would do is see whether the borrower can now afford the property on their own. I would check if there’s been any increase in income.

They may be able to successfully release their relative, sponsor or friend from the mortgage and own the property in full themselves. Generally, the remortgage will work exactly the same as a standard mortgage.

What are the pros and cons of a JBSP mortgage?

The big pro is definitely the stamp duty liability. It’s not being paid by the sponsor. The borrower would have to check that they’re within or over stamp duty thresholds by speaking to a solicitor.

Another pro is enabling a loved one or a friend to get on the property ladder, or potentially increase affordability to buy a bigger home.

With the JBSP your joint names are all liable for that mortgage, so you need to make sure that the payments are kept up to date. It’s an additional debt for the sponsor who is helping their loved one. Always seek legal advice before taking out this type of mortgage.

The term can also be restricted, as well. If the sponsor is of an older age, sometimes the term may have to be shorter on that basis – meaning the mortgage payments will be higher.

There are numerous lenders that do this type of mortgage, but they are limited – not all lenders would look at it.

How can a mortgage broker help if somebody is looking into a Joint Borrower Sole Proprietor mortgage?

Lots of people aren’t aware of this type of mortgage, but it’s a fantastic way of getting into the housing market. It’s usually used when somebody purchasing on their own doesn’t meet the affordability criteria, but a sponsor can help.

As an example, it could apply to a professional who has just started their new role, knowing that in a few years time their income would increase enough to take the mortgage on by themselves.