About a 7 minute read
Perhaps you’re sick of paying rocketing rent or maybe you’re living with parents and keen to fly the nest?
Usually aimed at first-time buyers, a JBSP mortgage could be a solution for people who can’t quite meet the affordability criteria for a mortgage without support, whether that be because of low income or bad credit.
Buying with parents on a JBSP mortgage might not be what you had in mind for homeownership but it could offer a temporary solution to getting your own place until you have enough income or a better credit score to secure a remortgage alone.
What is a Joint Borrower Sole Proprietor (JBSP) mortgage?
A Joint Borrower Sole Proprietor mortgage gives people who don’t quite have the income or financial capacity to get a mortgage on their own, get onto the property ladder with the support of a trusted person’s income on the application.
You, as the homeowner, still benefit from 100% ownership of your home and the non-legal owners don't have the rights to sell the property.
When a mortgage lender assesses a mortgage application, they look at lots of factors to determine the likelihood that the borrower will default (not keep up with their mortgage repayments).
One income or a low income, might not be deemed sufficient enough to cover the cost of the applicant’s current outgoings, a mortgage and the additional expenses that come with owning property like mortgage insurance or maintenance.
Perhaps an individual has an income of £15,000 a year and so the maximum amount they can borrow is limited - a JBSP mortgage could include their Mum’s annual income too, increasing the borrowing power or just improving their chances of meeting lending criteria.
How does a Joint Borrower Sole Proprietor (JBSP) Mortgage work?
An application for a JBSP loan takes your earnings as well as your parent’s earnings into account, though some lenders allow up to four people on a Joint Borrower Sole Proprietor mortgage.
Let’s say, like in the example above, you earn £15,000 a year. Some lenders cap the amount they can lend to people based on the income they earn, though usually, lenders use income multiples between 4.5 to 7 to decide how much they can loan.
A lender who is prepared to lend 4.5 x an annual salary might agree to you £67,500, if you earn £15,000 a year, so having a second income could help you borrow a bigger mortgage, opening up the choice of properties you can apply to buy.
If the person(s) supporting the application have an annual income of £20,000 a year, your combined incomes when multiplied by 4.5 could allow you to borrow £157,500.
Who can help me get a JBSP mortgage?
Usually it’s Mum/Dad that agree to have their names included but grandparents, godparents and other close relatives and friends have been known to help their loved ones buy a home by entering into this type of agreement.
All parties are named on the mortgage and are both jointly liable for the repayments, so if you default, the person(s) supporting the purchase could face the financial consequences as well as have their credit score negatively impacted.
With such a bespoke mortgage that is only dealt with by certain lenders, speaking to an adviser that works with many lenders is imperative for this sort of application.
For advice on getting a Joint Borrower Sole Proprietor mortgage, get in touch with The Mortgage Hut team.
Does the person helping me get a JBSP mortgage own the property too?
In contrast, the person supporting the mortgage will not be named on the deeds to the property and that means that, as a non-legal owner, they won’t be entitled to any gain in the property – be that via occupancy, rental yield or property value.
Pros and cons of a JBSP mortgage
Another benefit of using a JBSP mortgage to get onto the property ladder is that it opens up the range of properties that a first-time buyer can purchase.
First-time buyer schemes such as the Government's Help to Buy programme restrict people to only buying new builds whereas a person buying a home with finance from a JBSP mortgage can buy an older home, which could be cheaper in some circumstances.
That being said, parents planning on helping their children get a mortgage with a JBSP agreement need to consider that it could impact their own ability to get a loan or mortgage in the future, not only because of the additional financial obligation but in the event that you, the homeowner misses repayments and subsequently damages their credit score.
How is a JBSP mortgage different to a joint mortgage?
Though the product names sound similar, a Joint Ownership Mortgage is different to a Joint Borrower Sole Proprietor Mortgage.
Both the applicants named on a Joint Mortgage are registered as legal owners of the property.
With a JBSP mortgage, the person helping out and allowing their income to be calculated for affordability criteria, doesn’t have any ownership of the property.
Additionally, from the 1st of April of 2021, first-time buyers are exempt from paying Stamp Duty on properties under the £300,000 threshold.
If a parent who already owns a home wanted to get a joint mortgage with their son/daughter, they wouldn’t qualify for the first-time buyer stamp duty exemption and subsequently, their child wouldn’t qualify for this either.
A JBSP mortgage can allow a parent who already owns a home to declare that they have no legal ownership of the property, by signing a declaration of no beneficial interest.
This demonstrates that the non-legal owner has beneficial interest in the property and therefore, they are exempt from paying the additional Stamp Duty rate of 3% and their child can qualify for the first-time buyer Stamp Duty exemption.
Joint borrower sole proprietor mortgages with no credit score
If you have bad credit or a limited credit history that doesn't demonstrate sensible borrowing and repaying, you might find it difficult to get a mortgage on your own.
There are lenders that deal with bad credit mortgages specifically and with expert help, these can be gained, though often the interest rates can be higher.
A JBSP mortgage can provide an opportunity for low credit borrowers to buy a property by adding their supporter/parent’s income and credit worthiness to the application.
This can improve your affordability with a range of lenders and could result in a lower interest rate too.
If approved, you can build your credit score by making your mortgage repayments on time and in full as expected.
After time, you may have improved your creditworthiness and be able to apply for a remortgage for a loan with an even lower interest rate, saving you money and also releasing your parents from their obligation to be on your mortgage.
JBSP mortgage alternatives
The bank of Mum and Dad would be ranked in 11th position of the UK’s biggest lenders if it were a real bank, according to research from Legal & General.
Therefore, there may be alternative ways for parents to help their children buy a home that doesn’t involve them signing a Joint Borrower Sole Proprietor Mortgage, including:
If they’re planning on leaving you an inheritance, they could give you some of it as a deposit and deduct it from “your pot” so to speak.
Your parents or loved ones may also be in a position to be able to loan the money and this can be done with the assistance of a solicitor to ensure that both parties are protected and understand the terms of the agreement.
A 'springboard' mortgage could also be an option depending on your circumstances. This type of agreement would involve your supporter / parents depositing a percentage of the properties’ value into a special savings account and then after a few years, they get their money back, with interest.
JSBP mortgage FAQS
If I help my son/daughter with a JBSP mortgage, do I have to pay a second charge stamp duty?
The person that is supporting the purchase won’t have to pay the 3% second charge stamp duty fee when helping their son/daughter buy a property with a JBSP mortgage because they hold no legal ownership over the property.
How do I end a JBSP mortgage?
Ending a JBSP mortgage becomes inevitable for some people because of a relationship breakdown. It can be difficult for the non-legal owner to have their name removed from the mortgage agreement without a deed of release.
This would only be granted on the basis that you, the homeowner, can afford to repay the mortgage on your own, without your supporter/parent’s financial help.
Many people who take out a JBSP mortgage, remortgage after a few years to an agreement without their supporter / parent’s help, alleviating the legal responsibility of any mortgage repayments from them.
Another option could be to sell the property and repay the mortgage in full to end the agreement.
What happens if the legal owner dies?
In the event that the legal owner passes away before the end of the mortgage term, the executors of the legal owner are responsible for putting the property up for sale, with the intention of settling the mortgage from the proceeds.
Until the property is sold, the non-legal owner is legally obligated to pay the JBSP mortgage.
What lenders offer Joint Borrower Sole Proprietor Mortgages?
The number of lenders in the UK that provide JBSP mortgages is limited but with the help of a mortgage broker that specialises in finding affordable mortgages for first-time buyers and home movers, it could be possible.
There are high street banks that provide Joint Borrower Sole proprietor mortgages though smaller building societies can also be a great source of finance for people looking for this type of mortgage agreement.
Here to help you get a JBSP mortgage
Our experts are ready to help and have the knowledge needed to find the right deal for you. They take great care and time getting to know you and what you need from an agreement and then use this information to look for JBSP lenders that are most likely to accept you.
Call, make an enquiry or pop us a message via our online chat to find out more.
