First Time Buyer Joint Mortgage
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First Time Buyer Joint Mortgage
Kathryn Haycock talks us through a First Time Buyer joint mortgage.
Who is classed as a First Time Buyer?
A First Time Buyer is somebody who is buying a property for the first time. You’ve never bought a property before. But there are some lenders that would class you as a First Time Buyer if you haven’t owned a property for three or six years.
So if you owned a property ten years ago, some lenders would still deem you as a First Time Buyer whereas other lenders would not.
How do joint mortgages work for First Time Buyers?
A joint mortgage is basically a mortgage for two people rather than one. That really is the only difference.
My partner is a First Time Buyer but I’m not – what are my options?
We do get asked this a lot. Generally you would need both applicants to be First Time Buyers to qualify for any special deals. But if one is and one isn’t, there won’t be any obstacles in the road – you can still buy a property.
Do both buyers have to be First Time Buyers? Do couples lose First Time Buyer status if one partner bought in the past?
You can purchase a property with someone who isn’t a First Time Buyer, but you won’t qualify for the First Time Buyer deals or exemptions.
Do I have to pay stamp duty if my partner is a First Time Buyer but I’m not?
If one of you is a First Time Buyer and one isn’t, you unfortunately aren’t eligible for the stamp duty exemption. A First Time Buyer doesn’t pay stamp duty unless the property costs more than £425,000.
At the moment, in December 2023, the stamp duty threshold is £250,000 so if you’re buying under that amount there’s no stamp duty to pay, even if you’re not a First Time Buyer.
What does being joint tenants or tenants in common mean?
When you buy a property there are two ways you can structure it. Joint Tenants is generally the most popular choice. That is where two people buy a property together and they own that property jointly 50-50. If something were to happen to one of them, the other 50% naturally goes to the other person. You can’t leave your share to somebody else.
With Tenants in Common, each applicant owns a specific share of the property – for example, 60-40% or even 99-1%. They can also choose if they want their share to go to somebody else in their will.
Can I get a mortgage with a guarantor?
There are guarantor mortgages available, but I have been doing this job nearly ten years now and I’ve never actually done a guarantor mortgage. I’ve definitely had enquiries about them – in the past they were more available.
Nowadays, when lenders assess a guarantor it’s about putting them on the mortgage. They’re assessing whether the guarantor has a mortgage and commitments and factoring that into the affordability.
Usually mum or dad will be the guarantor – so they’ll be older. That would shorten the term of the mortgage and mean you can borrow less. Because of that, it often doesn’t work in practice.
But there are other options available if you need help. One of the big ones we’re seeing more of is called a Joint Borrower Sole Proprietor mortgage.
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What is a Joint Borrower Sole Proprietor (JBSP) mortgage?
It’s essentially where you’ve got two applicants on the mortgage but one person on the property deeds. Often the person wanting to buy the property is on a lower income and they’re just not quite reaching the affordability that they need.
Their parent can come on the mortgage to boost the income and achieve the affordability needed to purchase that property. They don’t officially own this property – they’re not named on the deeds with the child. They’re just on the mortgage for affordability purposes.
How much can I borrow as a First Time Buyer with a joint mortgage? How much deposit do I need?
It would depend on your combined income and expenditure. As part of our initial appointment we would gather all of the information from you regarding your income and expenditure to do a full affordability assessment.
Generally the minimum deposit is 5%, but if you have been renting for at least 12 months, you can show proof of rent and you’ve got a good credit history, there is a track record mortgage available. It’s essentially a 100% mortgage so there would be no deposit on that basis.
There is currently another option where parents could put a 10% deposit into a savings account linked to the mortgage. The child would get a mortgage for 90% and, provided they keep up with the mortgage repayments for five years, the parents can then withdraw their savings. Essentially that means no deposit, and it’s another way for parents to help their children whilst earning interest on the savings and not gifting the money. [podcast recorded in December 2023]
Can you transfer a joint mortgage to one person?
Yes, you can. If you purchase a property in joint names there could be a number of scenarios – buying with brothers, sisters, friends, partners, husband or wife… and circumstances do change.
If one person wants to be removed for whatever reason, the remaining applicant would have to go through an affordability assessment to show that they can afford that mortgage in their own right.
I’ve seen it in situations where a couple is splitting up. One of them wants to stay in the house with the children, but their income isn’t enough to support the mortgage. The other person would essentially be stuck on that mortgage until they can work something else out.
You would also need a solicitor to arrange the transfer from joint name to one name on the property deeds.
How do you calculate a First Time Buyer joint mortgage?
It’s the same as every other mortgage. We look at which lenders are offering the clients the amount they want.
How can a mortgage broker help me get a joint mortgage as a First Time Buyer?
Using a broker like ourselves takes the stress away from the whole process. We are all very experienced here at Appletree. If you were to go through the process by yourself to look for the right mortgage product, you would have to go into each bank and see whether you fit their criteria or if they’ll lend you enough. That could take on around two hours per appointment – whereas we can do our initial meeting in less time than that.
We’ll check the affordability and criteria to ensure that you’re getting the most suitable product for your needs.
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