Feeling like owning a home is just a dream? With house prices climbing, tougher lending rules, and shifts in the economy, buying a first home is becoming harder for many. Now, with 'Guarantor' mortgages getting more difficult to find, alternatives like Joint Borrower Sole Proprietor (JBSP) mortgages offer a new path to homeownership. This piece explores JBSP mortgages, providing the essential information you need.
What is a Joint Borrower Sole Proprietor Mortgage?
A JBSP mortgage allows you and another person to apply for a mortgage together, but only your name would be on the property titles. It's a great way to get a mortgage with a lower income, as the second applicant can help boost your overall affordability, allowing you to borrow more. While the second applicant won't legally own the property since their name isn't on the deeds, they will still be responsible for helping with mortgage payments.
This type of mortgage is perfect if your parents or family members want to help you purchase a home without becoming co-owners. Unlike guarantor mortgages, a JBSP mortgage doesn't require your parents or family members to use their savings or guarantee a deposit for you.
Excitingly, an increasing number of lenders are now offering JBSP mortgages, providing competitive rates comparable to standard mortgages.
How does a JBSP mortgage work?
Just like with a standard mortgage, lenders will carefully evaluate your finances, examining your expenses and income to determine the level of mortgage they can offer you. Age limits, income, and creditworthiness all play a role in meeting the lender's criteria. Certain mortgage providers enforce an age limit of 70 at the end of the term, while others extend it to 80 years old.
One crucial aspect of a JBSP mortgage is that only one borrower, known as the 'proprietor', is included on the property's ownership deeds. It is essential for you, as this individual, to reside at the property as required by most lenders. This type of mortgage allows parents or loved ones who are not interested in long-term ownership to exit the arrangement when you, the proprietor, become financially capable of managing the mortgage on your own.
Remember, missed payments can impact your credit profile, so responsible repayment is necessary for you and everyone involved.
Sharing a JBSP Mortgage: How Many People Can Be Involved?
Some lenders allow you to team up with up to three others, including family, friends, or partners, to co-borrow on a joint borrower sole proprietor mortgage. It's a popular way for parents to support their children in buying their first home, or for friends to combine their finances and purchase a property together.
However, you should remember that sharing a mortgage is a significant financial commitment. Having open and honest conversations about your expectations, responsibilities, and the potential risks involved is essential.
Is a JBSP Mortgage Right for Me?
A Joint Borrower Sole Proprietor Mortgage can be an excellent option for you if you're struggling to get on the property ladder due to a lower income or difficulty meeting lender criteria. It offers more flexibility and affordability by allowing you and another borrower to combine your income.
You should keep in mind that the non-proprietor borrower does not have any legal ownership of the property, so they will not benefit from any increase in property value. Ultimately, it's a personal decision that should be carefully thought out and discussed with all parties involved.
Pros & Cons of JBSP
When purchasing a property with someone who already owns a home, you would normally face an additional 5% stamp duty land tax. But with a JBSP mortgage, you can skip this expense as the other party are not placed on the property’s title.
You may be able to access a larger mortgage to help you purchase a property which would ordinarily be out of reach. However, do bear in mind that some lenders will expect you to take on the mortgage within a certain timeframe, five years for example. You should therefore only borrow what you can realistically afford to repay in future years.
By placing an older borrower on your mortgage will, with many lenders, restrict the term of your mortgage, therefore increasing your monthly repayments. You may be able to mitigate this with some lenders by placing a larger deposit on your home.
Keep in mind that both borrowers’ credit profiles will become linked as they share responsibility for the mortgage payments.
Depending on the lender, you may face additional legal fees since many require that the individual joining you on the mortgage seeks independent legal advice.
Be cautious with JBSP mortgages with family. Strained relationships or money issues can lead to conflict. Talk openly, set clear rules, and get legal advice to ensure ownership and responsibilities are clear and protected.
Do I Need A Deposit With JBSP?
Not always, no. If you have a family member that is willing to put up their own home as security for your deposit, some lenders will allow this and therefore not expect you to put in any deposit of your own. In other cases, the lender may require a deposit but at a lower amount than standard mortgages. The exact deposit requirements will vary between lenders, so it's essential to work with a mortgage broker as they can help you research and compare options.
Final thoughts
Buying a home is tough for first-time buyers, with rising rates, stricter lending, and fewer guarantor mortgages. But JBSP mortgages offer a way forward, letting you combine incomes and in some cases without needing a deposit. Ready to explore your options?
Your home may be repossessed if you do not keep up repayments on your mortgage.
Published by Beechwood Mortgages Ref: 219335 with review and approval from Stonebridge Mortgage Solutions Limited who is authorised and regulated by the Financial Conduct Authority Ref: 454811.
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