With house prices at an all-time high and still climbing, many first-time buyers and home-movers are looking for ways for help with mortgage affordability so they can purchase the home they want. Ashley Jones explains how a Joint Borrower, Sole Proprietor mortgage could help you.
What are Joint Borrower Sole Proprietor (JBSP) Mortgages?
Joint Borrower, Sole Proprietor mortgages allow you (the borrower) to add family members to the application, to enhance your mortgage affordability. The JBSP enables you to take out a larger mortgage on a higher value property than you would have been on your income alone.
They work by using your family member’s income to boost the lender affordability calculations. While the mortgage is technically a joint application, you remain the sole proprietor on the property title deeds. This arrangement also ensures that your supporting applicant is not charged additional stamp duty surcharges for the ownership of a second property, should they then wish to move.
Who can be a joint borrower?
On the whole, the majority of lenders only accept close blood relatives such as parents, siblings, grandparents, spouses, partners and sometimes aunts and uncles. We have access to some lenders that will allow for friends and non-related parties too, though few accept this.
It’s worth remembering that while multiple incomes can enhance your borrowing capability, lenders will consider the supporter’s financial commitments such as their own mortgages, loans and finance arrangements, which will impact your overall affordability calculation.
Some lenders require you, the primary applicant, to demonstrate that after a reasonable period of time (usually five years), you will be able to afford the mortgage on your own. Lenders may ask to see some element of possible career progression; from trainee to qualified professional, or roles where experience would usually qualify for income increases.
How many lenders offer Joint Borrower Sole Proprietor mortgages?
Currently, there are over 15 lenders who offer joint borrower, sole proprietor mortgages. This number has increased significantly over the last 12 months as lenders recognise that property prices are overly inflated compared to average earnings; and that it’s often difficult to obtain the level of mortgage borrowing required for the purchase of an average home, especially for first-time buyers.
While this type of mortgage is usually for first-time buyers or those on the starting rungs of the property ladder, some lenders will also allow for children to help parents downsize or move when their income has fallen due to retirement. However, lender age limits often restrict this (more on that in a moment).
Are Joint Borrower Sole Proprietor mortgages suitable for everyone?
As with any property finance, there’s no one size fits all. While it is a highly innovative mortgage product which can open doors for many making their first or next step on the property ladder, it does have its limitations.
One of the most common barriers to those seeking these types of mortgages is the age limit on borrowers; most mortgage lenders only consider those up to 80-85 years at the end of a mortgage term. If you’re looking at a 30-year mortgage term, for example, your parents must be below 50-55 years of age at the time of the mortgage application. With the average age of first-time buyers rising to 33 (BBC), this immediately makes this form of mortgage unattainable for many. Similarly, this can restrict anyone looking to help their parents move or downsize later in life.
The other limitation applicants often encounter is the ability to prove that the mortgage will become affordable in their sole name within a specified period. If you’re not currently a trainee or working in a profession where experience comes with set salary progression, it can restrict the number of mortgage lenders available to you. Furthermore, some lenders do impose a minimum income level for primary applicants from the outset, usually £20-25,000.
How do Joint Borrower Sole Proprietor mortgage applications work?
Lenders underwrite these mortgages in a very similar way to conventional mortgages; all applicants must provide proof of income and bank statements for assessment. The only real process difference is that many mortgage lenders will insist that all parties seek independent legal advice so that they fully understand the implications of the mortgage contract.
What’s the difference between a joint mortgage and a JBSP mortgage?
A joint mortgage occurs when a person borrows money with someone such as a partner to purchase a property, whereas a JBSP mortgage usually requires family members to be jointly responsible for the monthly mortgage repayments. In the case of a JBSP mortgage though, only the sole applicant has legal ownership, not the other family members.
What rates are available for Joint Borrower Sole Proprietor mortgages?
While some specialist lenders, including smaller regional building societies, price these mortgages higher due to the increased risks, most mainstream lenders also offer this type of mortgage as part of their standard product range. We have access to two-year fixed mortgage rates starting from 1.21% at 60% LTV for example.
(h2) Which banks offer joint borrower sole proprietor mortgages?
There are numerous mortgage lenders offering JBSP mortgages including Barclays, Halifax and Metro Bank. Some of the lenders have certain restrictions though. For this reason you may want to consider working with a mortgage broker who can help you find the best deal.
What are the benefits of joint borrower sole proprietor mortgages?
- Helps people get onto the property ladder
- A larger amount can be borrowed through combined incomes vs. making a solo application
- Pay less tax on buy-to-let property - joint owner, sole proprietor buy-to-let mortgages allow the property to remain in the lower income earner’s name, however, both parties contribute towards the monthly payments.
- Enables business owners to put their property in a partner’s name. This will keep the property completely separated from all other assets that could be taken in the event of their business failing.
How many applicants will joint borrower, sole proprietor mortgage lenders consider?
A number of lenders will accept up to four applicants for a JBSP mortgage. However, some lenders will only accept two incomes on an application.
Is a joint applicant, sole proprietor mortgage residential only?
No. JBSP mortgages exist for residential as well as buy-to-let properties.
What term can the JPSB mortgage be taken over?
Generally the maximum age at which the full-term of the JPSB mortgage must be paid is as high as 80 years, but some lenders implement a maximum age limit into their deals.
What other ‘help to buy’ alternatives are there?
While Joint Borrower, Sole Proprietor mortgages can be a perfect fit for some, they might not be for others. There are several other options aimed at helping you along the residential property ladder, many specifically designed for first-time buyers and those on lower incomes. These include Help to Buy Shared Equity, Shared Ownership and Family Assistance mortgages, which you can find more about in our helpful blog, here.
Alternatively, you can email me AshleyJ@mortgagesforbusiness.co.uk.
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