A joint borrower sole proprietor mortgage (JBSP) is a way for a close friend or relative to apply some of their income to a buyer’s mortgage application, to help them meet affordability requirements, without joining them on the deeds. This is a great option for low earners or young adults who might just be starting out in their careers and who would otherwise not be able to get a mortgage.
When they apply their income to the mortgage application, they are jointly liable for the mortgage debt as they become joint borrowers. They become legally responsible and will be obligated to step in if there are any issues. For some families, the parents or grandparents could be the backup plan if the buyer finds that they can’t make their monthly repayments.
So, having a Joint Borrower, Sole Proprietor Mortgage gives more borrowing power, but who is eligible?
- The upper age limit for the oldest borrower is typically 75-80 years old when the mortgage completes, as a JBSP mortgage relies on the completion of the mortgage term. So, if you were to go for a 25-year mortgage term, the maximum age for the oldest borrower when the mortgage is taken out would be 50-55 years old.
- Not every lender will accept an application if the person who is supplementing your income also actually lives at the property, so you will need to check on this.
- As with all mortgage applications, lenders will take into account the joint borrower’s existing commitments and outgoings. So if they have a large mortgage themselves or are paying off a big loan, this will affect the amount that they can contribute to the buyer’s mortgage.
What are the main pros and cons?
The Pros
- You can avoid stamp duty and capital gains, as only the homeowner has their name on the property deeds. Therefore, this means that the other parties involved in the mortgage do not have to pay any capital gains tax or the 3% stamp duty surcharge.
- You can get on the property ladder sooner, as the joint borrower allows you to increase your affordability with less deposit.
- It can be a steppingstone to sole ownership and independence. They are really intended to be temporary support and once the buyers’ circumstances change, such as getting a pay rise, the joint borrower can come off the mortgage.
The cons
- There will be some credit risk to both parties as they are jointly and severally liable for the monthly mortgage payments. So, if nobody pays them, then it will affect the credit history of both named on the application.
- All borrowers need to pass a credit check and so if the joint borrow already has large outgoing commitments, they might not be eligible.
- The joint borrower does not have any legal ownership of the home, despite being liable for repaying the mortgage.
- Not all lenders offer a joint borrower sole proprietor mortgage and they will also insist on you getting independent legal advice before being approved for one.
A joint borrower sole proprietor mortgage can make life much easier for first-time buyers wanting to get on the property ladder if they have a willing family member who can support this financially. But you will still need the right advice before applying and this is where I come in.
Get in touch today to see if this is the right route for you to take to getting your first home.
Call 07834 818805 or email [email protected].
How KB Mortgage Services can help:
Mortgages for first-time buyers
Remortgaging
Your home may be repossessed if you do not keep up repayments on your mortgage
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