Joint Borrower Sole Proprietor Mortgage

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Joint Borrower Sole Proprietor Mortgage (Part 1)

Sam Hubbard talks to us about a Joint Borrower Sole Proprietor (JBSP) mortgage.

What is a JBSP mortgage and how do they work?

A JBSP or Joint Borrower Sole Proprietor Mortgage allows multiple people to contribute to a mortgage application whilst, significantly, only one person – the sole proprietor – is the legal owner of the property.

Lots of people could be the joint borrowers, but only one will actually own the home. The joint borrowers are responsible for the mortgage payments, but do not hold ownership rights.

This arrangement is especially useful when a borrower needs extra help affording a property, often by combining their income with that of a family member or friends.

What responsibilities do the joint borrower and sole proprietor have in a JBSP mortgage?

Both the sole proprietor and the joint borrowers are equally responsible for the mortgage payments. If either party were to default on the loan, the other becomes liable for the full amount.

But while both share the financial responsibility, only the sole proprietor retains legal ownership of the property.

Who is eligible for a JBSP mortgage? Can I get a JBSP mortgage as a First Time Buyer?

Yes. First Time Buyers can apply for a JBSP mortgage, and it’s actually a very popular choice for those wanting to enter the property market who are struggling to meet mortgage criteria on their own.

By pooling incomes or credit worthiness with a relative or a partner, borrowers can very much improve their chances of securing a loan for a home they might not otherwise be able to buy.

What criteria do you need to meet for a JBSP mortgage?

To qualify for a Joint Borrower Sole Proprietor mortgage, both the primary borrower and the joint borrowers must meet certain criteria set by the lenders.

These will include a clean credit history, proof of regular income – whether you’re employed or self-employed – and the ability to afford the repayments. Typically, the joint borrower must be a relative and be happy to provide financial support without being listed as a property owner.

Lenders will also require the standard documents for a mortgage – such as proof of income, bank statements and identification.

A major point here is that joint borrowers will always be encouraged to take independent legal advice, to understand the commitments they’re entering into.

Do JBSP mortgages require a larger deposit compared to standard mortgages?

In general, JBSP mortgages don’t require a larger deposit than standard mortgages. Deposit requirements can vary from lender to lender, but they are similar to those of regular mortgages. Typically, that means starting at 5%.

A larger deposit, though, can result in better interest rates and lower Loan to Values. It doesn’t really matter whether it’s a JBSP mortgage or a standard loan – the more you’re putting in, the better the deal you’re going to get.

Do you pay stamp duty on a JBSP mortgage?

Yes, stamp duty is applicable to a JBSP mortgage, but it’s only on the proportion of the property owned by the sole proprietor.

Since the joint borrower does not legally own the property, they are not typically subject to additional stamp duty fees imposed on a second property. So, yes, you’re going to pay stamp duty, but it’s not going to be more than for anybody else.

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Can you have a sole mortgage on a joint property?

Yes, it’s possible for one person to have a mortgage on a property that’s jointly owned. As long as the individual can demonstrate their ability to afford the repayments, the lender will generally approve the loan in one person’s name.

The other co-owners will still be listed on the property deeds and may be liable for the debt if the primary borrower defaults.

What’s the difference between a joint mortgage and a JBSP mortgage?

A joint mortgage involves multiple borrowers who are both jointly responsible for the mortgage payments and equally share the ownership of the property. With a joint mortgage, you’re both on the mortgage and you’re both jointly responsible.

A JBSP mortgage involves multiple borrowers who share the responsibility for payments, but only the sole proprietor is the legal owner of the property. Somebody is supporting you to afford the property, but only you own it. It’s significantly different.

What’s the difference between a guarantor mortgage and a JBSP?

In a guarantor mortgage, a third party – usually a family member – agrees to cover the mortgage payments if the primary mortgage holder defaults.

However, the guarantor is not an official owner of the property. In contrast, a JBSP mortgage involves a joint borrower who shares responsibility for the mortgage, and the sole proprietor is the only person that holds legal ownership of the property.

These types of schemes are there to help borrowers get onto the property market, whether it’s a guarantor mortgage or it’s a joint borrower mortgage. If you’re in a situation where you need support and you’ve got people that will assist you, speak to brokers like ourselves. We will help you find the right solution for your situation.

What are the pros and cons of a JBSP mortgage?

These can be excellent solutions for buyers who need help to get where they want to go and enjoy home ownership.

The key pros are increasing affordability, with the support of somebody else. By combining incomes, you may be able to borrow more and access a broader range of properties. It gives you easier access to home ownership. A Joint Borrower Sole Proprietor mortgage can help First Time Buyers onto the property ladder who couldn’t do it on their own.

There are also potential tax benefits. The sole proprietor may benefit from certain tax advantages depending on their situation.

The downsides include that shared responsibility. Both parties are equally liable for mortgage repayments, which could lead to financial strain if one party is unable to make payments. There could be family or relationship tensions if things did go wrong.

Generally, it’s more complex. There are additional legal and financial considerations to take into account. But these products are designed to assist people buy a home. They can seem far more complex than they actually are, due to the jargon and terminology.

So if you need some assistance, speak to people like ourselves who are used to lenders’ criteria. As long as you know what you’re entering into, and the same for whoever’s supporting you, all should be fine.

What else do we need to know about JBSP mortgages?

I think we’ve covered a lot. Just remember that brokers like ourselves are genuinely here to help people to investigate these things further. We’re always open and listening.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.

For specialist tax advice, please refer to an accountant or tax specialist.