Joint Borrower Sole Proprietor Mortgages
Daniel Cherif and Tom Butcher from the Yellow Brick Mortgages team tells us all we need to know about JBSP mortgages.
What exactly is a JBSP mortgage?
A Joint Borrower Sole Proprietor (JBSP) mortgage allows multiple people to make payments on a mortgage debt, whilst just one of the loan applicants owns the property and is named on the deeds. So it’s a mortgage held in two names, where one person owns the property.
How do JBSP mortgages work?
With a Joint Borrower Sole Proprietor mortgage, you can borrow money to buy a home with someone else, like a partner, friends or family. Both parties are liable for the mortgage payments. So if one is unable to pay their share for whatever reason, the other must cover the commitment. On a Joint Borrower Sole Proprietor mortgage the lender takes both clients’ incomes into account when assessing how much they can lend, even though only one client will be the property owner and potentially live in the property.
What are the criteria for a JBSP mortgage?
The criteria are very similar to a standard mortgage. Your income and expenditure are taken into account, along with whatever that lenders’ standard criteria are around client age, maximum term, property types etc.
Who is liable for a joint mortgage?
Liability falls on all of the clients listed on the mortgage. There is usually a requirement for the party who is on the mortgage but not on the deeds to have independent legal advice – because they are liable for the mortgage but not a legal owner of the property.
Do you pay stamp duty on a Joint Borrower Sole Proprietor mortgage?
The stamp duty liability falls upon the applicant or applicants named on the property deed rather than those on the mortgage. That’s why this kind of mortgage is popular with parents or other homeowners who want to help a family member buy a home. Because they already own a property, if they were named on the deeds they would have to pay extra stamp duty. But as they are not named there’s a big saving on tax.
Can you have a sole mortgage on a joint property?
The short answer is no. However, you can have a joint mortgage with one income or you can utilise the Joint Borrower Sole Proprietor proposition. Lenders do not allow more people to be named on the deeds of a property than are party to their mortgage, as this would remove their legal ability to repossess the property in the worst-case scenario of non-payment of the mortgage.
What’s the difference between a joint mortgage and a JBSP mortgage?
The main difference is the implications on the deed. With a JBSP you can have two people on the mortgage, but just one person on the deed – who owns the property. With a joint mortgage, both mortgage holders are named on the deed and own the property jointly.
What’s the difference between a guarantor mortgage and a JBSP mortgage?
On a JBSP, the parent or family member of the property owner can contribute to the mortgage from the start. But with a guarantor mortgage, the guarantee would only become liable for the debt if the applicant is unable to make the payments.
One thing to remember with guarantor mortgages is that they are few and far between, and not offered by many of the high street lenders.
What are the pros and cons of a Joint Borrower Sole Proprietor mortgage?
The main positive is that it’s a way to get on the property ladder with a smaller income or even no income at all. If you’ve got a poor credit score, a JBSP could also assist by boosting your ability to get accepted for the mortgage. There is also the potential saving on stamp duty. Often young first time buyers may be able to afford the monthly payment on a mortgage, but the lender based on their income will not lend them enough money to buy one. With a JBSP mortgage, the client could have a family member on the mortgage but not on the deeds of the property, and the family member’s income can boost the available lending amount from the lender, opening up new purchase opportunities or a more expensive home.
In terms of potential cons, the main restrictions usually come with the person you’re adding to the mortgage. That might be their age, plus existing mortgages and expenditure, which are all taken into account as part of the application. All the applicants’ commitments explored, so running other mortgages in the background and general house-running costs could reduce the overall borrowing capacity. The additional person on the mortgage also has to be comfortable that they will be liable for a mortgage on a house they have no legal ownership of, which is why the additional applicant is usually a close family member.
Where can I get advice on whether a JBSP is right for me?
There is a lot to consider when looking for the most affordable way to buy a home. I would highly recommend speaking to a professional such as ourselves at Yellow Brick Mortgages because the criteria and general acceptance of the scheme fluctuates dramatically from lender to lender.
The differences in products with each of those lenders is also huge, and you need to consider rates and fees as well. So it’s really best to speak to a professional.
Another important point is that the future of this type of mortgage looks strong. As house prices become less affordable for the latest generations, more people are looking for assistance from family to support them onto the property ladder.
To understand more about how JBSP works and whether there are any other options to consider, get in touch with us today for an initial, no obligation chat.
Your property may be repossessed if you do not keep up with your mortgage repayments.