Joint Borrower Sole Proprietor Mortgage
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Joint Borrower Sole Proprietor Mortgage
Kathryn explains Joint Borrower Sole Proprietor mortgages and how they can help people get on the property ladder.
What is a Joint Borrower Sole Proprietor mortgage and how do they work?
A Joint Borrower Sole Proprietor mortgage is a mortgage in joint names, where the second borrower is not named on the deeds.
These types of mortgages are designed to assist clients on a lower income. The second borrower can join the mortgage to boost the affordability – so they would be able to borrow more. As the second borrower isn’t on the deeds of the property, they do not legally own the property – but they are liable for the mortgage.
What criteria do you need to meet for a Joint Borrower Sole Proprietor mortgage? Who is eligible for these?
Standard criteria applies. It is just a normal mortgage. Most people would be eligible, but these mortgages would be most beneficial to clients on a low income. Potentially they would suit someone with a low starting salary, such as a student that’s just started a job.
As they gain experience and qualifications, their salary will increase. The parents could go on the mortgage to help the child get onto the property ladder, and potentially come off a few years later.
In another scenario I had recently, a couple had split up and the wife wanted to stay in the property with the two children. Although she had been paying the mortgage for nearly a year by herself, on paper she didn’t earn enough to take it on.
She wanted to take her ex’s name off the mortgage. We explored different options and a Joint Borrower Sole Proprietor was one of the main options. We looked at adding a parent or sibling onto the mortgage to boost the affordability, so she could take her ex-partner off and stay in the property.
Do you pay stamp duty on a JBSP mortgage?
Standard stamp duty rates apply. As a First Time Buyer you are exempt from stamp duty up to a certain amount. At the moment [podcast recorded in January 2024] if you purchase under £250,000 there’s no stamp duty to pay.
The second borrower is not on the deeds so they would not be liable for stamp duty – they don’t legally own the property. This is where people can benefit. If mum or dad go on the property with a child, but they already own a home, they would be liable for additional stamp duty charges. With JBSP that isn’t an issue.
If you’re thinking about this kind of mortgage, speak to a solicitor about the stamp duty rates that could apply.
Can you have a sole mortgage on a joint property?
I’ve never actually had an enquiry about this and very few lenders offer it. It’s not very common. It’s unlikely lenders would allow you to take out a mortgage on a property in a sole name if it is jointly owned.
That question is potentially asked in a situation where one person in a couple had really bad credit or had been made bankrupt. They might not be approved for a mortgage – but they want to own a share of the property. But I don’t think many lenders would be happy with that.
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What’s the difference between a joint mortgage and a JBSP mortgage?
A joint mortgage is where two people are named on the mortgage and the same two people are named on the deeds of the property. Both of them own the property and both are liable for the mortgage. With JBSP there are two borrowers but only one property owner.
What’s the difference between a guarantor mortgage and a Joint Borrower Sole Proprietor mortgage?
A guarantor mortgage is where a family member might provide a guarantee on your mortgage repayments. These aren’t very common these days and only a select few lenders offer guarantor mortgages.
In the past, when I’ve had enquiries for these mortgages, they have ended up failing on affordability. Lenders assess the guarantor, who has to be able to afford that mortgage on top of any other mortgage and credit commitments.
If your parent is the guarantor, they will potentially be older, and the mortgage is based on their age rather than the child’s age. That means a shorter mortgage term and higher payments. It often doesn’t work out.
So a guarantor mortgage is becoming a thing of the past, while a JBSP mortgage has become more popular in recent years for people that just need a little boost on affordability.
Can I get a Joint Borrower Sole Proprietor mortgage with bad credit?
That’s a broad question, but approximately 12 lenders offer Joint Borrower Sole Proprietor mortgages – so there definitely could be an option available for clients with negatives on their credit file.
We’d need to know the details of that file to have a better idea of whether that would be an option. What I would suggest to anybody considering a JBSP mortgage is just to speak to us. We can see whether you meet the criteria with any of the lenders.
If someone has already taken a JBSP mortgage, what’s the process when they want to remortgage?
It would work the same way as when we originally took out the mortgage. We would just go through the affordability. If that had increased or the circumstances changed, we would look at remortgaging in your sole name, if that was the most beneficial thing for you.
If that’s not an option, we would look for any better deals available. Depending on the circumstances, a product transfer may work best – which means staying with the existing lender.
I would always recommend speaking to a broker to ensure you find the most appropriate deal available. We will always compare your current lender against the market and make sure there’s no better option available for you.
What are the pros and cons of JBSP mortgages?
The main pro is helping clients who would struggle on an affordability basis to get on the property ladder. That is purely what we would recommend this type of mortgage for.
The con I would say is that both borrowers are both solely liable for that mortgage. So for example, if one of them didn’t pay the mortgage, the other would be liable for the whole amount – it is a big commitment to that second borrower.
Essentially, they are there for affordability purposes but they are liable for that mortgage payment. That’s why you would generally choose a family member. If, for example, Applicant 1 decided they weren’t paying the mortgage any more, for whatever reason, Applicant 2 would be liable for that mortgage. But they don’t own that property.
How can a mortgage broker help? Is there anything else we need to know about JBSP mortgages?
Here at AppleTree we have access to a comprehensive list of mortgage providers, and a lot of them aren’t available on the high street.
Speaking to a broker like ourselves will give you a chance of understanding the deals available to you, without having to go in and out of each high street bank. We can not only save you a lot of time, but we can also save you a lot of money.
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