Lockings Solicitors

Why Consider a Joint Borrower Sole Proprietor Mortgage?

wooden house model

A joint borrower sole proprietor mortgage (also known as a JBSP mortgage) may be an option if your current financial situation means lenders won’t give you a mortgage on your own — for instance, if you have too low an income or bad credit.

Salary levels and a lack of savings may mean younger generations, in particular, have to rent, making saving for a house extremely difficult when combined with increasing rents.

If there is someone you know (often it’s parents, but it doesn’t have to be) in a better financial position who is prepared to take the risk of adding their financial credentials to yours, then a lender may be happy to say yes where they would have said no.

Not sure how a JBSP mortgage works? This is a specialist area in which we advise you to take specific advice for your circumstances, but here’s a general guide to point you in the right direction.

What Is a Joint Borrower Sole Proprietor Mortgage? 

A JBSP mortgage works slightly differently from other types of mortgage in that a parent, family member, or close friend can help with the mortgage without being named an owner of the property.

These parties can add their income to that of the person trying to buy a home. In most cases, they will help with the monthly mortgage payments, but not always. The key thing here is that although the person helping you is named on the mortgage, they don’t appear on the property’s title deed. So, they won’t own any of the property, but they will have full debt responsibility along with you for the mortgage payments. This means the mortgage company can come after them as well as you if payments are not met, and their credit score can be affected as well as yours.

So it’s a big commitment for whoever is helping you and they need to fully understand it and be comfortable with it before agreeing to go ahead. All lenders will insist anyone helping you gets independent legal advice from a solicitor different from yours to make sure they understand their commitment. This advice will include how helping you with your mortgage might affect their borrowing capability in the future if they were to seek a mortgage.

Who Can Use a JBSP Mortgage?

If you have a reliable income and willing family members or friends who are in a financial position to cover whatever the lender would reject you for on your own (e.g. because of low income or bad credit), you may be eligible for a joint borrower sole proprietor mortgage.

However, the available options are narrower than for a standard mortgage. Not every lender is willing to offer this type of mortgage and those that do have some strict criteria when it comes to JBSP mortgages. Depending on your mortgage lender, you may also have to factor in the following:

  • Age: Mortgages rely on the borrowers being able to pay back the loan — that’s why there are often upper age limits on who can help you with a JBSP mortgage. It’s common to find that anyone helping you with this type of mortgage can’t be older than around 75-80 when the term for the mortgage is complete. So, in this example, if you are seeking a 25-year mortgage, the person helping with your JBSP mortgage can’t be more than 50-55 years old. But remember, there are mortgage providers who are more flexible than this.
  • Cohabitation: If you have someone supplementing your mortgage, many lenders won’t accept an application for a JBSP mortgage if the person will be living with you in the property they’re helping with. Again, like all of these considerations, you may find mortgage lenders who offer a little leeway.
  • Finances: If you have someone helping with your mortgage, the mortgage provider will also consider their financial situation. That will include any outstanding mortgage they owe and any debts or loans they are paying off. If these financial considerations are large, the amount they can contribute to your mortgage will be reduced.

Generally, JBSP mortgages are used by families, with one of the most common scenarios being parents helping their children. The child becomes the property’s sole owner and — provided the payments are kept up and their situation improves in the eyes of the lender — they can then look to remortgage and release the parent from any future obligation.

new home owners hugging each other

This type of mortgage is also beneficial for self-employed people who may struggle to provide details of a reliable and consistent income stream. People with bad credit, or little in the way of credit history, can also get a lot of value from JBSP mortgages.

Some people use JBSP mortgages when investing in a buy to let. In these cases, partners (married or otherwise) can use this kind of mortgage, although it works a little differently. If one partner is earning less money than the other (or doesn’t earn anything), the one making more can contribute to the mortgage without being added to the title deeds. Ownership of the home will still be in the lower earner’s name. This can have positive repercussions regarding tax obligations and monthly rent payments.

How Are JBSP Mortgages Different from Joint Mortgages?

Joint mortgages have been a mainstay of the property market for a long time and being able to pool resources with partners is a standard option for buyers. Joint mortgages are useful because they let people add their savings together and get better repayment options, lower interest rates, and larger mortgages.

With a traditional joint mortgage, everybody involved will be named on the title deeds, meaning they will part-own the property. A JBSP mortgage is different because even though up to four people can be added to the mortgage, only one person will be named on the title deed. That means only the named individual will have legal ownership of the property.

The other difference with a JBSP mortgage is if one of the contributors (a parent, for example) already owns a property. Because they won’t have any legal ownership of the second property, they can contribute to the extra mortgage without affecting any first-time buyers’ stamp duty relief available to the owner.

What’s the Difference between a Guarantor Mortgage and a JBSP Mortgage?

The JBSP mortgage is slowly replacing the traditional guarantor mortgage. With a guarantor mortgage, someone will guarantee that they will make any mortgage payments on a property if the property buyer fails to make those payments. It’s like a guarantee to reassure mortgage lenders. However, with a JBSP mortgage, everybody named on the mortgage will likely make regular payments. But remember, the obligation for the payments to be made in full is on the owner and the person helping them with the mortgage.

Finding JBSP Mortgage Lenders

Not many people are aware that joint borrower sole proprietor mortgages exist. That’s because they’re still largely a niche mortgage offering. So at the moment, there simply aren’t a huge number of mortgage providers offering a JBSP mortgage.

You’ll need to shop around if you’re interested in a JBSP mortgage. Some high street banks provide them, but some specialist lenders and building societies have also started to offer them. Always do your research, though, and make sure that age limits and repayment terms don’t leave you struggling financially.

That’s why it’s a good idea to speak to a mortgage broker before you decide what kind of mortgage and what lender is best suited to your situation. Brokers will be able to give you professional advice about alternative mortgage options and lenders, and they can be a goldmine of good advice.

two people discussing documentsThe Pros and Cons of JBSP Mortgages

As with most types of mortgage, there are pros and cons. That’s why it’s so important to have a firm understanding of everything regarding JBSP mortgages. Let’s take a look at the positive aspects.

Pros of a JBSP Mortgage

  • Stamp Duty: Any first-time buyer’s relief available to the owner will not be affected as the joint borrower is not an owner.
  • Cost: It may be easier to borrow more but still have lower interest rates with a JBSP mortgage. There may be access to cheaper mortgage deals and more manageable repayment options. Buyers who take advantage of a JBSP mortgage may get access to a larger mortgage than they would if they applied on their own.
  • Getting on the Property Ladder: The whole purpose of the joint borrower sole proprietor mortgage is to make it easier for people, especially first-time buyers, to get onto the property ladder.
  • Paced Independence: Mortgage repayment support is one of the main goals of the JBSP mortgage. As and when the property owner’s financial circumstances improve (e.g. they get a pay rise/a higher paying job and a decent amount of time under their belt in their new role), they can look to remortgage and go it alone.
  • Fewer Limitations: With options like the Help to Buy scheme, there are limitations on the kinds of property you can buy. Help to Buy is commonly limited to new builds. JBSP mortgages don’t have the same restrictions, which can mean a wider range of properties available to choose from.

It’s not all good news, though. There are some downsides to using a JBSP mortgage.

Cons of a JBSP Mortgage

We’ve already seen how there are age limits on who can help with a JBSP, but this isn’t the only disadvantage to this type of mortgage. Here are the cons of a JBSP mortgage.

  • Credit Checks: Everyone named on the mortgage will have to be thoroughly credit checked.  If any of them have any credit issues, the JBSP mortgage application will likely be refused.
  • Financial and Credit Risk: One of the scariest parts of a JBSP mortgage is the line that says “jointly and severally liable”. This means if mortgage repayments don’t get paid, then the mortgage company can go against the joint borrower (who is most likely to have the means to pay) for the full amount. Also, the credit scores of everyone named on the mortgage will be negatively affected. In serious cases where mortgage payments stop long-term, the property will be repossessed.
  • Arguments: If the people named on the mortgage have a falling out, it can be exceedingly difficult to have their names removed from the mortgage. That means they may have to make those monthly payments and they still won’t have any legal rights regarding the property.
  • A Complicated Process: Applying for a JBSP mortgage can be complicated. There are more identity checks, more admin, and more steps to verification, including a requirement for independent legal advice to be taken by the joint borrower who is not the owner.

Can I Remortgage with a JBSP?

Remortgaging is when you transfer the mortgage on your property to another lender. That new mortgage will then replace the older one. You can remortgage a house with a JBSP. However, it’s important to be aware of any early repayment charges you may incur. Your lender will also need to be satisfied that you are a good risk on your own, which — depending on how much your situation has improved — might limit your options.

How Do You Get a JBSP Mortgage?

Your first step to getting a joint borrower sole proprietor mortgage is to find the right mortgage offer. We advise you to contact a mortgage broker as your first step, as they will have a much better idea of the best option for your situation.

You’re also going to need to instruct a solicitor. This is important, whatever kind of mortgage you’re applying for. There are a lot of legal steps when buying a home, and having the right solicitor on your side is going to be vital. Get your solicitor involved as early as possible, as this can get your purchase off to the best start once you are ready and it can minimise delays further down the line.

The Joint Borrower Sole Proprietor Mortgage

A JBSP mortgage can be a good option for those in certain financial situations — from the self-employed to those with a low income and it can be the key to getting a firm footing on the property ladder. However, it’s not without its risks, and you should never start an application for any kind of mortgage without professional assistance.

However, for those who would otherwise struggle to get a mortgage, the JBSP is extremely useful. While not everyone will have friends or relatives who can help, for those lucky enough to be in that situation, a JBSP mortgage can open up opportunities.

If you need any help with buying your first home, or you’re unsure of the legal ramifications of a joint borrower sole proprietor mortgage, you can request a call back with our friendly office team and then get a FREE initial chat with one of our friendly welcome team.

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