Joint Borrower Sole Proprietor Mortgages

It can be a real struggle for first time buyers particularly to get on the housing ladder. Not only can it be hard to save for the deposit, stamp duty (if needed), legal fees and moving fees, it can also be hard to pass the affordability checks for a mortgage. Although there are Government Schemes like Shared Ownership or the New Homes Scheme and even the mortgage guarantee scheme, these are not always right for everyone. There are, however, new mortgage products coming on to the market to help first time buyers, or those struggling with affordability checks to get a mortgage. One of these is called the joint borrower, sole proprietor mortgage (JBSP). We take a more detailed look at these mortgage products in this article.

What is a Joint Borrower Sole Proprietor Mortgage?

At its most basic, a joint borrower sole proprietor mortgage is a mortgage where there is more than one borrower but only one person owns the property. As an example, someone buying a new home could apply for the mortgage, also have their parents apply for the mortgage as well. Despite the fact that the parents are on the mortgage, they will not own the property or be listed on the title deeds.

How does a Joint Borrower Sole Proprietor Mortgage work?

In pretty much all respects a JBSP mortgage works exactly the same as a normal mortgage. All the borrowers will need to make an application for the mortgage and the normal credit and affordability checks will be carried out on each applicant. The great thing about the JBSP products is that everyone’s income is considered and the normal multiples are used when calculating affordability. For example, if the first time buyer earned £30,000 per year, a typical lender would be prepared to lend, based on a pretty standard 4.5x income, £135,000. The borrower’s parents, between them, earn £75,000 which takes the combined income to be considered to £105,000 which, based on a 4.5x lending multiple could mean a lender being prepared to lend just over £472,000. The pooling of salaries can potentially open up a many more property options. The terms of the mortgage will mean that an owner needs to be specified and that person will have to live in the property. Typically, any other borrowers will not be allowed to live in the property. All borrowers will be jointly and severally liable for the mortgage payments, however. If any one of the borrowers defaults on payments, then the others will have to make up the shortfall. It is important to understand that any default, no matter who defaults, will show up on all borrowers credit files and could cause adverse credit for everyone on the mortgage. When the “owner” can afford to, they can simply re-mortgage to a sole mortgage. In the unfortunate event that the “owner” passes away, the other borrowers are still liable for mortgage payments until the property is sold.

What About Stamp Duty?

Typically, when someone buys a property and they already own a property, they pay an enhanced stamp duty levy. Also, movers don’t qualify for the reduced rate of stamp duty that first time buyers have. The good thing about JBSP mortgages is that the supporting borrower is not buying the property so are ignored as far as stamp duty is concerned. As such the first time buyer stamp duty rates will still apply and there is no 3% premium.

What are the Lending Criteria?

• Good credit history
• Passes affordability checks
• Won’t be aged over 75-80 at the end of the mortgage term

Who offers Joint Borrower Sole Proprietor Mortgages?

These types of mortgages are still relatively uncommon but there are a few lenders who offer them:

• Barclays Bank
• Bath Building Society
• Furness Building Society
• Hinckley & Rugby Building Society
• Metro Bank
• Newcastle Building Society
• Principality Building Society
• Skipton Building Society
• Tipton & Coseley Building Society

When considering a joint borrower sole proprietor mortgage, it is advisable that everyone gets expert legal advice so that the legal status of everyone in the transaction is fully known. JBSP mortgages can be a great way for those struggling to get a mortgage on affordability grounds to get on the property ladder.