Joint Borrower Sole Proprietor Mortgages

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, Joint Borrower Sole Proprietor Mortgages, Montgomery Financial

JBSP Mortgages

Charles explains Joint Borrower Sole Proprietor mortgages and how they can help people increase their borrowing power. 

What is a Joint Borrower Sole Proprietor (JBSP) mortgage and how do they work?

It’s a specialist mortgage product provided by some lenders. Not all lenders offer these. A JBSP mortgage allows more than one person to be named on the mortgage and make payments towards it – but only one applicant owns the property and is named on the deeds. 

So two or more people can be on the mortgage, but only one person would own the property and appear on the official Land Registry deeds. It has a lot of benefits with stamp duty and affordability, but we’ll cover that shortly.

What criteria do people need to meet for a Joint Borrower Sole Proprietor mortgage?

Anyone can get one, and it’s ideal for First Time Buyers. You might want someone else on the mortgage, like a family member or a friend. As long as you both meet the affordability criteria, it should be fine. 

Lenders look at both people’s affordability and ages. So if you have an elderly relative going on the mortgage, it could impact how much you can borrow. Deposit and credit score are also important, so it’s very similar to a normal mortgage.

Do people have to pay stamp duty on a JBSP mortgage?

The stamp duty would be the responsibility of the person who’s going to own the property, not the person who’s trying to help them. So if a parent is helping out a child, then the child pays the stamp duty. The parent wouldn’t be liable. They are just a party to the mortgage.

Can you have a sole mortgage on a joint property?

No. You can have a joint mortgage that’s only based on one person’s income, or you can use a Joint Borrower Sole Proprietor mortgage, but you can’t have a sole mortgage on a joint property. 

Lenders just don’t allow there to be more people on the deeds than on the mortgage. If someone didn’t pay their mortgage, but other people are on the deeds, the lender wouldn’t be able to repossess the house if needed. It’s about protecting their own interests. 

Similarly, you can’t have two different lenders on a standard mortgage. You couldn’t have Barclays and Santander as two mortgage parties, because they wouldn’t know who was going to get their money first if they ever needed to repossess.

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

The main difference is that with a Joint Borrower Sole Proprietor you are able to have two people on the mortgage, but only name one person on the deeds. With a joint mortgage, both people are named on the mortgage and both are named on the deeds. 

It comes down to who owns the title of the property. With Joint Borrower Sole Proprietor, one person owns the property but two people are on the mortgage. Both are liable for the debt.  

On a joint mortgage, which is typically used by a couple buying a house together, they are both liable for the debt and both own the property. 

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

With a Joint Borrower Sole Proprietor arrangement, the parent or family member can contribute and help out with the mortgage as soon it is completed. If the main applicant isn’t able to pay the monthly amount themselves, the parent can assist.  

But with a guarantor mortgage, the guarantor is only called upon when the main applicant stops making payments.

So, with a JBSP it’s automatically factored in for a parent to assist. With a guarantor mortgage, the family member is trying to help out if things go wrong. It’s more like a last resort rather than being a party to the mortgage. 

If a guarantor is asked to pay, usually something has gone very wrong – the main applicant can’t afford it and their credit record is being damaged. 

Can someone get a JBSP mortgage with bad credit?

It’s similar to standard mortgages. If you’ve had issues in the last six months, it’s going to be difficult to get any mortgage. If you had credit issues two years ago, it’s much more likely that you’ll be able to find a lender, especially if it’s a JBSP deal. 

It comes down to the lender’s risk profile and your credit score etc, but as most of the JBSP lenders are a bit more niche and specialist, it is possible.

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We want to keep that relationship with you up until your mortgage completes in 20, 25 or maybe 35 years. It’s not just a one-off transaction. It’s a long-term relationship, where we watch the market to get you the most positive products out there and try to save you money.

How does someone remortgage a JBSP mortgage?

We would either be discussing remortgaging in the main applicant’s own sole name, if they can afford it, or continuing on with a new JBSP deal. 

There’s very little difference in how the process works. We would assess all options, like we do with every mortgage, to see what’s best for the clients at that time and their long term goals and needs. 

What are the pros and cons of JBSP mortgages?

The main pro is that if someone is struggling with affordability to get on the property ladder, this can be a great boost. It can allow them to borrow that little bit more to get a property. 

If you’re on a lower income, it helps boost you. If you’ve not got the greatest credit record, it can also be a helpful route because the other party boosts your credit a little. 

The main downside is that it’s a bit more restrictive. If a parent is going on the mortgage with you, their age could end up shortening the term you can obtain. That will increase your payments as a result. 

If they currently have a mortgage or credit commitments, those are taken into account within their affordability. Their income may also be a factor, especially if they’re retired and receiving a pension already, or they’re cutting back their hours at work. Is their income actually going to be enough to sustain both their current home and this mortgage?

There are lots of different things to think about. We have specialist software where we put in all the credit commitments and income of both parties for JBSP mortgages. It comes back immediately with the options. 

Another downside is that the parent or family member is going to be liable for the mortgage, but they have no legal ownership of the property, which is a risk. But the bonus is that they won’t have to pay extra stamp duty to assist their child – which they might in another situation. 

So there are lots of pros and lots of cons which is why it’s so important to seek advice before entering into this. Someone with experience in this can guide you to make an informed decision.

What else do we need to know about Joint Borrower Sole Proprietor mortgages?

With niche products like this, it’s imperative to get a mortgage advisor’s help. We will guide you and hold your hand, and foreshadow any pitfalls ahead that you may not have thought of. 

We explain the costs and encourage you to have a long term plan – because ideally you won’t want a joint borrower on the mortgage forever. We will consider how we can get them off the mortgage over time. 

We will understand whether you’re going to meet the lender’s criteria and affordability, so getting all this advice early on is really important. I’d always recommend speaking to professionals like Montgomery Financial, because we understand the affordability criteria for specialist schemes like this and the lenders who are providing them. 

We can really make the difference in getting that property you dream of. Speak to a professional early on to get the best advice possible.

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

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