What is a joint borrower sole proprietor mortgage?
Found your dream home but unable to afford the mortgage? Do you have family members who are keen to help but aren’t able to gift you the deposit? Many first-time borrowers have help from family or friends to get on the property ladder. One way they do this is with a joint borrower sole proprietor mortgage (JBSP mortgage) aka a guarantor mortgage. This is a type of mortgage where you add family or friends to the mortgage to boost your borrowing power. Any family members are not added to the deeds so you remain the sole owner of the property.
A joint borrower sole proprietor mortgage allows you to include the income of additional parties on a mortgage application without giving them ownership rights. The additional income extends the affordability on an application, helping you to borrow more than you would normally be able to. However, by adding the additional parties to the application they become jointly liable for the mortgage and its payments.
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Who are joint borrower sole proprietor mortgages designed for?
JBSP mortgages are a type of specialist mortgage designed for individuals who have difficulty obtaining a mortgage on their own. They might be first time buyers, low income earners, have a limited credit history or derive some or all of their income from a source that might be unacceptable to lenders (self-employed but not trading long enough, income from maintenance payments, zero hour worker etc.)
It allows older family members to support younger ones by adding them to the mortgage application to boost the income on the application. By adding this income you increase your chances of securing a mortgage for the property that you want.
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How is a joint borrower sole proprietor mortgage different to the help to buy scheme?
The help to buy scheme provided government-backed equity loans to help buyers with a deposit to help buy a property. Whilst help to buy funded the deposit, a JBSP mortgage helps you cover the remaining balance due on the property. With the help of the “income boosters” (family / friends included on the mortgage) this helps to increase the amount you can borrow, allowing you to secure a bigger loan. The help to buy scheme ended at the end of March 2023 and is no longer available for new participants. There are other affordable schemes to help you buy including shared ownership, rent to buy and the key workers scheme (if you qualify). Our expert team is always on hand to discuss the options available, and to help you find a mortgage product that is best suited to your circumstances.
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Joint borrower sole proprietor mortgage: pros and cons
If your income is insufficient to get a mortgage, you may be eligible for a JBSP Mortgage. We’ve outlined the pros and cons of taking this approach below, helping you to decide if it could be the right solution for your own property ambitions.
- You can join the property ladder much quicker than you would be able to without help
- The higher your income, and the more deposit you can put down, the cheaper the deal you can get. Lenders partly determine product rates based on loan-to-value (LTV) – how much you are borrowing against the value of the property. For every LTV threshold you cross (95% 85% 75% 50%) the cheaper the rates tend to be and the lower your payment is.
- You’ll have a wider choice of properties. Whilst some home ownership schemes (such as Shared Ownership) limit you to the type of properties you can buy, a guarantor mortgage will allow you to buy any property you can afford.
- You are free to make decisions about the property. Even though others are on the mortgage, they won’t own the property leaving you free to make your own choices.
- You are the owner of the property, the ‘income booster’ family members will not be named on the title or deeds so it’s all yours.
- It’s flexible. You can get on the property ladder and once you are in a position to afford the mortgage by yourself, you have the option to remove family members.
- As guarantor mortgages are often taken out by first-time buyer applications you’ll often pay either less or no stamp duty.
- All borrowers are liable to make repayments and any missed payments can affect everyone’s credit file. Any adverse data on the credit file could impact a borrower’s future chances of getting further credit.
- For most JBSP mortgages, only the main buyer is the owner. Anyone else contributing to the mortgage will have no rights to it. If you do want a JBSP mortgage which allows the income boosters to build up an ownership stake in the property, this may be an option and we would recommend you speak to our mortgage brokers and a legal advisor to talk through the implications.
- Walking away from the mortgage can be difficult if relationships with family members (who are boosters) break down.
- All borrowers must pass a credit check. If family members have other commitments including another mortgage, they might struggle to pass the assessment.
- You can’t usually use JBSP mortgages in conjunction with any other affordability schemes e.g. Help to Buy, Shared Ownership, Key Workers.
- On some JBSP Mortgages, older income boosters can limit the term you can take the mortgage out over – and this can lead to higher monthly payments.
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Why choose Simple Fast Mortgage to help secure a joint borrower sole proprietor mortgage
Our experienced mortgage advisors understand that in many cases, individuals need help from family and friends to buy the property of their dreams. We’ve helped many borrowers join the property ladder using our experience and extensive knowledge of the mortgage market. Our team will take the time to listen to your individual needs to find out what your main obstacles to finding a mortgage have been. We’ll then find a lender who is familiar and more understanding of your situation so that we can secure the right mortgage for your circumstances. The “income boosters” on your application will also need to obtain independent legal advice, before embarking on a JBSP mortgage. Our advisors work with a network of legal advisors who are knowledgeable on this type of finance and will be only too happy to refer you to one who can help.