Joint Borrower Sole Proprietor Mortgage
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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.
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.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
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.
Joint Borrower Sole Proprietor Mortgage (Part 2)
James Best continues the conversation on Joint Borrower Sole Proprietor mortgages. Episode two of three, recorded in November 2024.
What responsibilities do the Joint Borrower and Sole Proprietor have in a JBSP mortgage?
This is really important. Even though it has a fancier, elongated name as Joint Borrower Sole Proprietor, the responsibilities for all parties involved are exactly the same as for a traditional mortgage customer. They have to keep up with the repayments on the mortgage, and ensure the property has buildings insurance.
Anyone considering this scheme should view it with the same seriousness and consideration as if you were taking out a mortgage on your own.
Is there a Joint Borrower Sole Proprietor mortgage age limit?
Some lenders out there have greater flexibility with the maximum age limit with this scheme. Usually, the additional people on the mortgage application are providing income to support the mortgage for affordability purposes.
Lenders need to make sure that the income being used on the application is ongoing and sustainable for the whole mortgage term. As such, some lenders will restrict the maximum age at the end of the mortgage term based on how long the borrowers are going to be working. Once they retire, they may not have enough income to support the mortgage.
The standard scenario for Joint Borrower Sole Proprietor is a younger First Time Buyer being supported by a parent. You may find that you couldn’t do a 35 or a 40 year term on that basis with some lenders. Those terms are restricted by the amount of time that the income is going to be received.
Talk to a suitably qualified mortgage advisor about this, because we can go through the different options and benefits. We would look at all of the lenders offering mortgages on these schemes to make sure that you’ve got the most suitable term.
Can I get a JBSP mortgage as a First Time Buyer?
Absolutely. These schemes replaced a lot of the old guarantor mortgages from a few years ago. Many of our clients that have used and benefited from this scheme are indeed First Time Buyers.
You don’t have to be a First Time Buyer to benefit from it, but it is designed with those types of buyers in mind. I would say that there is a First Time Buyer involved in the majority of the applications we do.
Are there additional fees or costs associated with taking out a JBSP mortgage?
Yes, and this is really important to consider. In addition to the usual fees on a purchase like solicitors, surveys and mortgage fees, the borrower that isn’t going on the title deeds of the property has to get independent legal advice on the whole transaction.
That’s often a requirement from the mortgage lender, to make sure that both parties to the mortgage are acutely aware of the scenario and the legal implications. Essentially, the Joint Borrowers are responsible for the mortgage repayments, but not actually benefiting from owning the property.
What documentation is required for both the Joint Borrower and the Sole Proprietor in a JBSP application?
It’s exactly the same as the documentation required for a sole or a joint purchase. The mortgage lender and the broker would need to understand all parties’ financial circumstances. We can give the appropriate advice and package it to the most suitable mortgage lender.
Are there restrictions on the types of properties that can be purchased with a JBSP mortgage?
Not necessarily property type. Most houses, flats, maisonettes, coach houses are compatible with the JBSP scheme. What isn’t compatible are some of the specialist schemes used to fund those purchases.
Things like shared ownership aren’t compatible with the Joint Borrower Sole Proprietor scheme at present. But if you are considering JBSP and have a type of property in mind that you’re looking to buy and it’s standard, 100% purchase, it should be suitable subject to the usual survey considerations.
Can the Joint Borrower be added after the mortgage has already been taken out?
The main benefit of this scheme is for purchase applications. Adding somebody after the mortgage is completed who isn’t going to be on the deeds, is a really quirky and unusual scenario – because the affordability has already been agreed. And that is the main reason to have a sponsor or a guarantor on the application – to provide the additional income boost to get the loan amount over the line.
This scenario is most likely going to be a remortgage, where someone’s being added on to the property, perhaps due to a change of scenario. You would probably be looking at a brand new application.
Can I get a JBSP mortgage with my parents? Can I get a JBSP mortgage with my children?
Yes, to both of those. Those scenarios are essentially the bread and butter of the scheme. I’ve done one of each of these types of scenarios in the last month, helping clients both ways. JBSP is there to benefit both parents and children where there are suitable circumstances.
Can I get a JBSP mortgage with my siblings or friends?
Absolutely. Some lenders insist on some kind of familial connection between the borrowers and the proprietors, but others will accept friends as long as the scenario makes sense.
It’s about understanding the whole situation, because ultimately as advisors and brokers, we’ve got to package that scenario to the mortgage lender and make the underwriters understand what is going on. If it makes sense to us and we can portray that, it should make sense to the mortgage lender.
How does having multiple joint borrowers affect a JBSP mortgage application? Are there limits on the number of joint borrowers in a JBSP mortgage?
Having multiple joint borrowers on a JBSP application can be beneficial in that you’ve got more income on the application to support the mortgage.
If you need a more expensive property, having multiple parties to the mortgage could mean you have enough income to buy it. You can borrow a higher amount from the lender. With multiple borrowers, you’re all going to be connected. Your credit scores are all going to impact the application.
Having all those joint borrowers on the application means you are all tied to the same commitment. If you are looking at getting future credit elsewhere, that mortgage will be taken into consideration. It’s going to have an impact on your family group as a whole, compared with having fewer named people on the application.
In terms of limits, I’ve done JBSP mortgages with four parties – a client and their partner as the proprietors and then both parents as the sponsors. Again, the benefit is that you could buy a more expensive property. If the mortgage payments are higher, it can be more affordable having four parties named on the mortgage.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
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.
Joint Borrower Sole Proprietor Mortgage (Part 3)
James Best covers more questions on Joint Borrower Sole Proprietor mortgages.
Can I use a JBSP mortgage to buy a second home or a holiday home?
Yes, you can, but this scenario is quite niche. The circumstances would need to make sense and not all mortgage companies would accept this. But I have done cases where this was applicable and there are lenders out there that can consider the scheme.
Does the Joint Borrower have to live in a different property?
As the name implies, Joint Borrower Sole Proprietor, the idea is that the person named on the mortgage – the borrower – doesn’t reside in the property. They’re taking the mortgage for the benefit of somebody else.
Many of the lenders that offer the JBSP scheme will insist that the borrower resides at their own current address. However, I’ve done one last month where all parties on the application were going to live in the property upon completion – and this mortgage lender is completely comfortable with that.
It’s important that we understand your scenario so we can tailor a recommendation to suit that.
Can I switch from a standard mortgage to a JBSP mortgage?
Yes, you could, depending on how that switch is done. For example, if it was a sale and a purchase, that’s standard and you can swap across. If you’re living in the same property and you needed to add someone on the mortgage or take them off, that’s classed as a remortgage. That can be done as well, following the standard JBSP rules.
How do interest rates compare for JBSP mortgages?
This is a really good question. Historically, guarantor schemes had much higher interest rates compared to standard mortgages.
The brilliant thing is that these mortgage schemes are very competitive. Many lenders don’t present a JBSP mortgage as a niche or specialist product – so you can pick whatever product is suitable for you at that time.
You can get the same product with this scheme as if you were buying the standard way. Some lenders do have their own bespoke JBSP mortgage products, but again those are very competitive across the market. There is no massive difference between those and standard mortgages. It’s just another way that lenders are trying to be open and flexible, to support as many mortgage clients as possible.
Is it possible to use a JBSP mortgage for Buy to Let properties?
Yes, it is possible, but again, not all mortgage lenders are happy doing it this way. Some will insist it has to be residential, and others will insist it has to be a standard Buy to Let – with all parties on the mortgage also named on the property deeds.
Other lenders can consider this, which could benefit clients that have large portfolios or want to add other parties to their properties for the future. It’s about us understanding that scenario and why it is suitable for you. So get in touch and we can guide you through that process.
What happens if the Joint Borrower passes away or can’t pay the mortgage?
It’s never nice to consider this, but the terms and conditions of a JBSP mortgage are exactly the same as a standard mortgage. It’ll be treated in the same way as if you were to die with a standard mortgage on a property.
With any significant change of circumstances that affects the mortgage being paid, get in touch with the mortgage lender. I cannot stress how important that is. Communication with the lender will be massively helpful – they have options at their disposal to support you whilst you’re getting things sorted out.
As brokers we do have to deal with calls from clients where things like this have happened. We’re trained to support clients in those difficult situations and we know what to do. We can help you get in touch with the mortgage lender and support you through everything that’s going on in your life at that time.
Can I get a JBSP mortgage if one borrower has an existing mortgage?
Yes, you can. The existing mortgage will be included in the affordability assessment alongside the new mortgage. Providing that mortgage is affordable across everyone named on the JBSP mortgage, and they can cover both mortgages and expenses, you can go ahead.
Many of our clients have existing mortgages and benefit from these schemes. It may mean that the borrowing is slightly less, compared to someone with no mortgage or a mortgage-free property, but it’s a common situation for JBSP borrowers.
Do JBSP mortgages require a larger deposit compared to standard mortgages?
The lower the deposit, the fewer lenders are available for the scheme, and the higher interest rates may be. However, you don’t need a massive deposit to benefit from the scheme. It can be accessed with smaller deposits.
I can’t name specific amounts, because the market is fluid and changes all the time, but you don’t need a large deposit for JBSP. Get in touch and see what options are available – it’s not restrictive in that nature at all.
Are there any special considerations for older Joint Borrowers in a JBSP mortgage?
The income that’s being used to support the mortgage needs to be sustainable over the whole mortgage term. Where we have older clients that might be looking to wind down their income in the next few years, or retiring, they may see this scenario as more of a temporary measure.
In the future, ideally things will have changed and you’ll be taken off the mortgage. But the lender will assess it as if the mortgage will continue for the entirety of the term.
As the Joint Borrower, you have to look at this as a long-term commitment, not a temporary one. You are legally tying yourself to this mortgage over the whole term. Things may not happen as planned in the future, and you could be on that mortgage longer than you think.
How can a broker help me with a JBSP mortgage?
Hopefully, we’ve demonstrated why we are worth talking to when you’re looking at JBSP mortgages. There are lots of different lenders and deals, and the market at the moment is crazy. It is so important to get the right advice from someone that knows these schemes.
We have had clients come to us having been told certain things, and we’ve been able to find them a mortgage solution that is significantly different or better. This happens all the time. So speak to a suitably qualified expert to explore absolutely everything – then you’re aware of what all your options are.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
THE FINANCIAL CONDUCT AUTHORITY DOES NOT REGULATE MOST BUY TO LET MORTGAGES.