A joint borrower sole proprietor (JBSP) mortgage helps buyers who want to take out a mortgage with somebody else, but do not want that person to be named on the title deeds and have a legal stake in the property.
The most common use of this type of mortgage is for first-time buyers who cannot afford to buy a property on their own. By including somebody else’s income – often a parent – in the affordability assessment, they are able to borrow more money and get help with repayments, without having to share ownership of their home.
How are JBSP mortgages different from joint mortgages?
Pooling your financial resources with someone else, such as a partner, can help you build up a larger deposit, and potentially reduce the amount of interest you’ll have to pay in the long run.
With standard joint mortgages – such as those used by couples buying a home together – all parties will be named on the title deeds and have a legal stake in the property. However with a JBSP mortgage, as many as four people can be named on the mortgage, but only one has legal ownership of the property.
Also, if the supporting borrower – such as a parent – already owns property, they won’t have to pay the 3% stamp duty surcharge for second homes with a JBSP, as they would if they took out a standard joint mortgage. This is because they won’t have any legal rights to the new home.
Who can use a joint borrower sole proprietor mortgage?
JBSP mortgages are typically used by families where parents borrow alongside their child to help them buy their own home. The son or daughter becomes the sole owner of the property and can revert to a standard single mortgage once their income has risen enough for them to have a mortgage on their own.
However, JBSP mortgages can also be useful for the newly self-employed or those with a poor or limited credit history.
Couples seeking a buy-to-let property when one partner has a considerably lower income than the other, or even no income, can also use them to their advantage. Under a JBSP mortgage, the higher earner can help contribute to the mortgage, while the ownership of the property and the income in the form of rent remain in the lower earner’s name, thus reducing the couple’s tax bill.
JBSP mortgages are also particularly helpful for people who own a business or other venture. If the business fails and its proprietor’s name is on the title deeds, the home could be seized or taken as payment for any debt.
Pros and cons of JBSP mortgages
- A JBSP mortgage allows an individual to gain access to a larger mortgage than would otherwise be the case.
- If more than one party contributes to the deposit, it’s also possible to access lower interest rates, since lenders generally offer better terms to those with larger deposits.
- If other applicants, such as parents, already own a property, they won’t be liable to pay a second-property stamp duty surcharge, as they won’t be registered on the title deeds.
- You aren’t confined to new build properties, unlike a government scheme such as First Homes.
- JBSP mortgages can be used for residential and buy-to-let mortgage applications as well as by first-time buyers.
- Should the relationship between the joint borrowers break down, it may prove difficult for the non-legal owner to have their name removed from the mortgage.
- The person who isn’t the legal owner is legally liable for the mortgage repayments but has no rights to the property and isn’t eligible to receive any financial gains if, for example, it’s sold at a profit in the future. If the legal owner stops making the repayments, the other parties to the mortgage will still be liable for the full amount.
- The application process will be more complicated than if you were applying on your own, since you’ll have to verify more than one person’s income and identity.
- Having a financial arrangement with someone in the form of a JBSP can have a far-reaching impact on your credit score. If the other member of your joint mortgage has bad credit it can harm your application for a joint mortgage, while missed or late payments during your mortgage term will show up on your credit score even if you weren’t responsible for the missed payment.
- They are not very widely available, and you will probably need to engage the services of a qualified mortgage broker to source one suitable to your needs.
How much can I borrow?
This will vary from lender to lender. You can typically have up to four people on a JBSP mortgage and although most lenders will cap what they will lend you at 4.5 times that joint income, some may offer more.
Alternatives to joint borrower sole proprietor mortgages
You could borrow money from close relatives (for example, your parents). But remember that if you fail to repay the loan, you may jeopardise your relationship with them.
Under a shared ownership scheme, you buy a share (generally between 25% and 75%, but sometimes as low as 10%) of the home and pay rent on the remainder. You have the option to increase your share during your time in the property via a process known as ‘staircasing’. Unless you own 100% of the home, however, there will be restrictions on what you can do with it, such as letting it out. It can also be more complicated to sell a shared ownership property.
Tenants in common mortgage
This type of mortgage allows two or more people to own a share in a property. The shares don’t have to be equal. It can be a useful vehicle for parents who want to help their children onto the property ladder and protect their investment.
Difference between JBSP and a guarantor mortgage
Under a guarantor mortgage, someone (usually a close family member) guarantees to meet the mortgage repayments if the borrower fails to do so. However with a JBSP, both parties are likely to pay the mortgage together. With both types of mortgage, neither the guarantor or the other borrower on the JBSP will have any legal rights to the property, despite being liable for repayments.
Some guarantor mortgages allow you to get a mortgage without any deposit at all – these are called 100% mortgages. But guarantor mortgages are increasingly giving way to JBSPs.
Can I remortgage with a JBSP?
You can remortgage a house bought through a JBSP. Indeed, these mortgages are ideal for people on low incomes whose salaries are likely to rise in the future. However, it is important to be aware of any early repayment charges.
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