As a first-time buyer, affordability may be the main issue preventing you from getting a foot on the property ladder. Family members are often willing to help out, boosting your borrowing power, but may be reluctant to commit to some of the options available.
One type of mortgage that you may not have heard of before is a joint borrower sole proprietor mortgage. It enables you to maximise your borrowing potential with help from a loved one while you retain sole ownership of your new home.
What is a joint borrower sole proprietor mortgage?
A joint borrower sole proprietor (JBSP) mortgage is a unique solution to buying a home that’s solely in your name but with financial help from a family member or friend. You may even have more than one person who wishes to help you. In that case, up to four borrowers can usually apply for this type of mortgage.
Each applicant is named on the mortgage and is jointly liable for making the repayments. Only you, however, are named on the deeds, making you the sole owner of the property. This is different from a joint mortgage, where each applicant is named on the mortgage and the deeds. In this case, if another applicant is already a homeowner, they will be liable for a stamp duty surcharge for having an additional property. This can be a significant cost and one that can be avoided with a JBSP mortgage.
The aim of a joint borrower sole proprietor mortgage is to be a temporary solution to help you buy a home. Once you’re in a position to take over the mortgage yourself, you can remortgage and the other borrower can be released from their commitment.
Is a JBSP mortgage just for first-time buyers?
Whilst this arrangement is typically used to help a first-time buyer purchase their first home, it’s not exclusively a first-time buyer product. A JBSP mortgage can be used for anyone needing financial support to improve their affordability.
This includes those who want to move home but have a low or inconsistent income and can’t meet the affordability criteria. For example, borrowers who are self-employed or contractors increase a lender’s risk with their irregular incomes. Applicants who have just started a new career may be on a low starting salary.
On the other hand, some borrowers can have a good income but a low credit score. For any of these scenarios, having support from someone with a stable income and a good credit score improves your chances of having a successful application.
How is the affordability calculated for a joint borrower sole proprietor mortgage?
When calculating the affordability for joint borrower sole proprietor loans, lenders take each applicant’s income into account. Where your salary alone may not enable you to buy the home you want, a combined income assessment can significantly increase the amount a lender is prepared to offer you for a loan.
For example, if you earn a salary of £30,000 and the lender uses an income multiplier of 4.5, the maximum loan you’d be offered when applying on your own is £135,000. However, your parent may wish to help you and agree to be named on a joint borrower sole proprietor mortgage. If their salary is £45,000, the lender will include this in its calculations. Therefore, with a combined income of £75,000 multiplied by 4.5, you could borrow up to £337,500 between you.
As you can see, this makes a huge difference when you’re looking for somewhere to buy. And it’s not just the income from a supporting borrower that can help with your affordability. You can also pool your savings to put down a larger deposit. The more deposit you can pay, the less you’ll need to borrow. This, in turn, will give you access to more competitive interest rates.
Bear in mind that each borrower’s expenditure is also reviewed as part of the affordability checks. If a supporting applicant is a homeowner, their outstanding mortgage balance will also be taken into account.
Are there any joint borrower sole proprietor mortgage risks?
The main risk is that supporting borrowers are jointly liable for the mortgage without benefitting from ownership of the property. If any mortgage payments are late or missed, each person’s credit file will be negatively affected. Another consideration for the supporting borrower is that their ability to secure future credit may be affected. This is because the JBSP mortgage will be included in their debt-to-income ratio.
As such, it’s important to ensure that every applicant understands their liability and the impact that this type of undertaking can have on them. Lenders expect any non-owner borrowers to have received independent legal advice before committing to this arrangement.
Take the first step towards buying your new home
This specialist mortgage is a great way to increase the amount you can borrow, enabling you to secure a loan that would otherwise be out of your reach if applying on your own. You will be the sole owner of your home and your supporting borrower won’t be liable for a stamp duty surcharge if they already own a property. It enables them to help you out financially without it being a long-term commitment as you can remortgage once you can afford to.
For more information and to get started with your JBSP application, just give us a call on 01322 907 000. An expert joint borrower sole proprietor mortgage broker will discuss the details of this arrangement with you and the person supporting you so that you’re fully aware of what it entails. When you’re ready, they’ll find the best deal to suit both of your needs.