Joint Borrower Sole Proprietor (JBSP Mortgage)

What is a joint borrower sole proprietor mortgage?

When you’re faced with high property prices and subsequently high deposit requirements, buying a property can seem far out of your reach. This is especially the case with a low or irregular income or a bad credit rating. A joint borrower sole proprietor mortgage (JBSP) allows you to get around this issue. You submit a joint application for the mortgage, making it much easier to qualify, but you are the only person who owns the property.

The eligibility criteria are no longer a barrier because applying for a mortgage with someone else takes their income and credit score into account. Combining your incomes allows you to borrow more and you can pool your savings to afford a bigger deposit. Their good credit score gives you a boost if yours is low or you have a lack of credit history.

This type of mortgage lets up to four applicants buy a property with only one being named on the deeds. It’s a good way for a parent or other family member to help you buy a home without having joint ownership of it. A JBSP mortgage isn’t restricted to just your family members, either, as friends can also apply for joint borrower sole proprietor mortgages, depending on the lender.

For the sake of this guide, we’ll refer to a joint application with just one other borrower. As both of you are named on the mortgage, you’re jointly liable for the mortgage repayments from the outset. This reduces the risk for the lender. You, however, are the only one named on the deeds and so can enjoy full ownership of your home. As the other applicant isn’t named on the deeds, they’re not liable for a second property stamp duty surcharge if they already own a property.

How does a JBSP mortgage work?

Not just for first-time buyers, a JBSP mortgage can be used for any residential application as well as to purchase a buy-to-let property. Applying with someone else boosts your borrowing potential when your circumstances may otherwise put a mortgage out of your reach. For example, you may have just started your career and have a low starting salary, you may be self-employed with an irregular income or your salary may simply not be sufficient when applying for a mortgage on your own.

Combining your income with someone else’s increases your affordability and maximises your borrowing potential. This either helps you to get on the property ladder as a first-time buyer or move up it if you’re an existing homeowner and want to remortgage so that you can buy a better property. You can also combine your savings to put down a bigger deposit. When you’re able to afford the mortgage on your own, the other borrower can be released from their obligation.

Tax benefits

If the other borrower already owns a property, they don’t need to worry about being penalised with stamp duty. They can still help you with your mortgage but as they’re not on the deeds, they’re not liable for the second property stamp duty surcharge. This can make a JBSP mortgage more appealing than some alternatives, such as a joint mortgage.

When purchasing a buy-to-let property with someone else, a JBSP mortgage has tax advantages. Whilst both of you make the monthly mortgage repayments, the property can go in the name of the person with the lowest income, helping to reduce your tax bill.

What restrictions apply?

As mentioned above, up to four applicants can usually apply. This significantly boosts your affordability for a mortgage. It also means that the mortgage repayments are made by everyone named on the mortgage even though you are the only legal owner of the property. Some lenders restrict the number of applicants for this type of mortgage, such as allowing a maximum of two.

An income multiplier of 4.5 is generally used to determine the amount a lender is prepared to offer you. If you have a salary of £30,000, for example, a lender may offer you £135,000 when buying a property on your own with a standard residential mortgage. Should your parent agree to a JBSP mortgage and have a higher salary of £45,000, however, you could potentially buy a property up to a value of £337,500.

An upper age limit at the time the mortgage term ends is set by lenders, which is usually 75 years old but some lenders allow for an age of 80. This may restrict you if the person you wish to apply for the mortgage with is likely to be too old at the point of application.

It’s also important that you trust each other completely as you are jointly responsible for making the mortgage repayments. This means that if one of you is unable to pay your share, the other is legally liable. If a mortgage payment is missed or a late payment is made, both of your credit scores will be negatively affected – regardless of whose fault it is – as you have a financial association with each other. Also, lenders usually require that the property owner lives in the property but that none of the other borrowers do.

How much can you borrow for a joint borrower sole proprietor mortgage?

Lenders generally use an income multiplier of 4.5 when calculating the affordability of a residential mortgage. The same multiplier is usually used by joint borrower sole proprietor mortgage lenders. However, instead of just taking your income into account, it is used for the combined incomes of the joint borrowers.

Referring to the earlier example where you have a salary of £30,000, you would only be approved for a mortgage loan of £135,000 when applying on your own. With property prices generally being much higher than that figure, this would make it difficult for you to buy anything. If your parent applies for a mortgage with you, however, and they earn £45,000, the lender would multiply the combined incomes of £75,000 by 4.5. This would enable you to borrow up to £337,500 between you, making it much easier to afford a property.

Joint borrower sole proprietor mortgage eligibility criteria

As with standard mortgages, lenders assess each borrower’s affordability and creditworthiness for joint borrower sole proprietor loans.

Income

The criteria vary between lenders but, as mentioned above, a multiplier of 4.5 is generally used for the income. Some lenders set a minimum income requirement for the person to be named on the deeds (the owner borrower), such as £20,000. Most lenders accept up to four joint borrowers while some may set a maximum of two, for example. Each borrower’s outgoings and debts are also taken into account along with the income.

Deposit

The deposit amount you can pay determines the lenders that can be approached and, subsequently, the deals you have access to. The more you can pay, the more deals become available and they usually have better rates. With a joint application, you can pool your savings to raise a bigger deposit. A higher deposit lowers the loan-to-value (LTV) ratio and provides access to more competitive interest rates. Some lenders won’t accept applications where certain deposit schemes have been used, such as Deposit Unlock.

Credit rating

Each borrower’s credit history is checked to ascertain whether there are any issues with adverse credit. Having a lack of credit history, a low credit rating or a bad credit rating can sometimes affect whether or not you’re approved for a standard mortgage. With a JBSP mortgage, however, the other borrower’s credit rating is taken into account as well as yours. Their good credit score gives yours a boost. Our mortgage brokers can also advise you on ways to improve your credit rating before you apply for a mortgage.

If you have a bad credit history, the lender will look into this. They will take into account the severity of the issue, how long ago it occurred and the reasons behind it. Lenders differ in their criteria when assessing bad credit issues, with some offering more flexibility than others. Our mortgage brokers can ascertain which lender to approach on your behalf, depending on your circumstances.

Non-owner borrower

Whilst the main borrower (the sole proprietor) must reside in the property, non-owner borrowers enter a joint borrower sole proprietor mortgage knowing that they have no legal right to live in the property. Lenders differ on their requirements for the person agreeing to be on this type of mortgage without any legal claim to the property. Some are happy to accept applications from any family members or friends. Others, however, only accept immediate family members. Non-owner borrowers are expected to have received independent legal advice before committing to a joint borrower sole proprietor mortgage.

Age restriction

Lenders set maximum age limits for the end of the mortgage term. This is usually 75 years old although some lenders accept applicants who will be aged 80 at the end of the term. Some lenders may have specific requirements in cases where borrowers will be aged 80 when the mortgage term ends. For example, if this applies to the person you are borrowing with, you may be required to take on a larger percentage of the mortgage loan than them. If the age restriction is likely to cause an issue, you can consider reducing the mortgage term, although this will increase your monthly payments.

Other restrictions

Some lenders exclude particular mortgage types when offering joint borrower sole proprietor loans. For example, they may not allow an interest-only mortgage or a discount mortgage. Some may not allow a JBSP mortgage to be used to buy a second home or to be used via the shared ownership scheme. Our mortgage brokers know the criteria restrictions set by each lender, ensuring that the right one is approached for your needs.

What joint borrower sole proprietor mortgage stamp duty is payable?

Stamp Duty Land Tax (SDLT) is payable when you buy a residential property and the rates applied are set at thresholds. As the sole proprietor of the property you’re buying, the normal stamp duty liability applies to you. Currently, and applicable until 31^st March 2025, if you buy a property up to a value of £250,000, no stamp duty is payable. If you are a first-time buyer entering into a JBSP mortgage, you are exempt from paying stamp duty up to the property value threshold of £425,000.

For the non-owner borrower, who is likely to be a homeowner, the usual stamp duty charges differ when entering into this type of mortgage arrangement. Normally, if someone buys a second home, they are liable for a stamp duty surcharge of 5%. However, the person entering into the JBSP mortgage with you is exempt from the second property stamp duty surcharge. This is because they are not classed as a legal owner of the property with this type of mortgage. Entering into a JBSP mortgage with you, therefore, saves them a considerable amount of money in this respect compared with other mortgage types, such as a joint mortgage. That’s why a JBSP mortgage can be a favourable option for someone wishing to help you buy a property.

Take the first step towards your future goal

The purpose of a JBSP mortgage is to enable you to buy a property when you’d struggle to do so on your own with the goal of taking full responsibility for the mortgage when you’re able to. If your circumstances change, such as receiving a salary increase, and you can afford the repayments on your own, then you’re expected to remortgage. This can either be with the same lender or a new one if you prefer. The other borrower can then be released from their responsibility for paying the mortgage.

This arrangement allows someone to help you buy a property on the understanding that it’s on a temporary basis and they’ll be released from their commitment when you can afford to take over completely. The lender will usually expect you to provide an explanation of how you intend to make the repayments on your own in the future.

To get started with your JBSP application, just give us a call on 01322 907 000. Our expert mortgage brokers are ready to ascertain how much you can borrow and arrange a mortgage in principle for you. Located throughout Kent, London and Edinburgh, our mortgage specialists have unrestricted access to the market, ensuring you benefit from the most competitive deals available.

At Trinity Finance, we also offer other home-buying services you may wish to take advantage of, such as arranging your home insurance and mortgage protection cover. If you’re unable to give us a call, send us an email at info@trinityfinance.co.uk or an enquiry via our contact form and we’ll reply to you as quickly as possible with more information.

Joint borrower sole proprietor mortgage pros and cons

As with any mortgage, there are pros and cons to consider before entering into a JBSP mortgage. We’ve detailed them below for you so that you can weigh them up carefully before making a decision.

Pros

• Get on or move up the property ladder with the increased affordability that another borrower provides.
• Combine your savings to pay a bigger deposit and benefit from better interest rates. The more you can put down, the lower the loan-to-value (LTV) ratio will be and, in turn, the lower the interest rates.
• Despite having help with the mortgage, you will have sole ownership of the property.
• If the other borrower is a homeowner, they won’t be charged a second property stamp duty surcharge.
• You aren’t restricted to buying a certain type of property, which you are with some government-backed schemes. For example, you can only buy a new-build property if you apply for the Help to Buy: Equity Loan scheme.
• This type of mortgage can be used for a residential or buy-to-let property.
• Intended as a temporary mortgage solution, you can remortgage when your circumstances change for the better and the other borrower can be released from their commitment.

Cons

• Affordability and credit checks are carried out on each borrower.
• Each borrower is jointly and severally liable for the mortgage repayments.
• If any mortgage repayments are late or missed, both of your credit ratings will be affected regardless of whose fault it is. This can have a big impact on the relationship between you and the other borrower and needs to be considered carefully.
• Whilst being financially committed, the other borrower won’t have ownership of the property or benefit from any financial gain, such as a share of the profit if you sell the property in the future. This is, therefore, a significant undertaking for them and all other options need to be fully discussed before making a decision.
• You can’t apply for financial assistance via some of the government-backed schemes with a JBSP mortgage.
• The age limit set by the lender may affect the other borrower’s eligibility. You may decide to have a shorter mortgage term to get around this issue but your mortgage payments will be higher as a result.
• Being financially obligated to a JBSP mortgage, the other borrower may have difficulty getting another loan.
• If one of you wishes to leave the mortgage arrangement – for example, if the relationship between you changes – it can be a complicated and costly process.
• As a specialist mortgage, not all lenders accept applications for a JBSP loan. As a result, the pool of joint borrower sole proprietor lenders you have access to is limited compared with other mortgage types. Our mortgage brokers know which lenders deal with this niche mortgage and will compare their terms and rates for you.

Can you end a JBSP mortgage?

As mentioned earlier, a JBSP mortgage is intended to be a temporary solution until you can afford to take over the mortgage yourself. At that point, you can remortgage and release the other borrower from their commitment. Some lenders set an expectation of when you should be able to do this, such as after having the mortgage for 5 years. Generally, though, there’s no timescale to adhere to. Each lender differs with their criteria and our mortgage brokers will ensure that you’re aware of the terms.

There may be other times when you wish to end the arrangement due to a change in circumstances. For example, you may be in a relationship and your partner wants to be named on the mortgage and deeds. Or the other borrower may want to buy a property or apply for a different type of loan but is unable to get approval due to the increased affordability. As long as the lender is satisfied that you can afford the mortgage repayments on your own, they may agree to issue a deed of release to the other borrower.

Alternatively, you can both agree to sell the property and repay the outstanding mortgage from the sale proceeds. Another scenario to consider is what would happen in the event of your death. In this case, the executors of your will would have to sell your property and use the proceeds to repay the mortgage. Until completion of the sale, the other borrower would have to continue making the mortgage repayments.

If there is a dispute between you, however, and a deed of release cannot be issued or selling the property isn’t agreed upon, then legal action may need to be taken by the relevant borrower. This course of action, though, will be lengthy and expensive.

How does a JBSP mortgage differ from a joint mortgage?

We’ve made reference to joint mortgages a couple of times within this guide but how exactly do JBSP and joint mortgages differ from each other?

For a start, the ownership is different. A joint mortgage is suitable for those wishing to own a property together as each party is named on the title deeds. With a JBSP mortgage, up to four people can be approved for the loan and be jointly liable to make the mortgage payments. However, only you can be named on the title deeds as the sole proprietor. The other borrowers have no legal claim on the property. As such, you are usually the only borrower allowed to live in the property, depending on the lender’s stipulations.

Another difference is the stamp duty liability. If one of the borrowers for a joint mortgage is already a homeowner, they will be liable for a second property stamp duty surcharge, which is avoided with a JBSP mortgage.

Lenders’ incentives also differ. When applying for a joint mortgage as a first-time buyer, you won’t benefit from any incentives that a lender would normally offer you if one of the other borrowers is an existing homeowner or has previously owned a property.

What are the joint borrower sole proprietor mortgage tax implications?

One of the main reasons that a JBSP mortgage is a more appealing option than a joint mortgage to someone who wants to help you get on the property ladder is the stamp duty liability. If they´re an existing homeowner and apply for a joint mortgage with you, they are named on the deeds and the new property is classed as their second home. As such, they become liable for the second home stamp duty surcharge.

Joint borrower sole proprietor stamp duty is not an issue for them, however. This is because you are the only person named on the deeds and the new property isn´t, therefore, classed as their second home. They’re also not liable for capital gains tax. This makes a JBSP mortgage a much cheaper option for someone who wishes to help you out financially.

As the sole proprietor, you will be liable for stamp duty depending on how the price of the property fits within the stamp duty thresholds. Capital gains tax may also be payable if you decide to sell the property in the future.

Are there any joint borrower sole proprietor mortgage risks?

There are some risks involved with JBSP mortgages so you need to consider them carefully before proceeding:

• The non-owner borrower is liable for the mortgage but has no legal claim over the property. This means that they are risking their income on a property they have no rights to.
• If either of you misses any mortgage payments, the other person must cover them. If these payments are made late or not covered, both of your credit scores can be affected.
• Any negative aspects that occur as a result of this arrangement, such as mortgage payment issues or the non-owner borrower being unable to obtain another loan, can also affect your relationship.

Many lenders require proof that independent legal advice has been taken. This is to ensure that each borrower fully understands the risks before entering into a JBSP mortgage arrangement.

The alternatives to a joint borrower sole proprietor mortgage

If you’re not entirely sure that a JBSP mortgage is right for you or the person offering to help you out, there are alternatives to consider.

Guarantor mortgage

With a guarantor mortgage, someone, such as your parent or another relative or a close friend, agrees to cover your mortgage repayments if you’re unable to make them. They have to provide security for the lender and understand that they won’t have any rights over the property as you will be the only one named on the deeds.

Shared ownership

Shared ownership is a government-backed scheme that enables you to use your deposit and a mortgage to buy a percentage of a property – usually between 25% and 75% of its value – and pay rent at a discounted rate on the remaining value. You can increase your share of the property when you’re able to do so, via a process called staircasing.

Family springboard mortgage

With a family springboard mortgage, a member of your family pays a minimum of 10% of the property’s value into an account that’s linked to your mortgage for a fixed term. This provides the lender with security. The savings earn interest during the fixed term and then, provided that you haven’t missed any mortgage payments, are returned to your family member when the fixed term ends.

Joint mortgage

A joint mortgage allows you to buy a property with someone else, such as a family member, partner, friend or business associate. Up to four people can apply for a joint mortgage with each person being named on the property deeds and being responsible for the mortgage payments. There are different arrangements available for a joint mortgage, enabling you to either own equal shares of the property or have different shares. For example, if one of you has paid a higher deposit, it may be a fairer arrangement to allocate a bigger share of the property to that person.

95% mortgage guarantee scheme

This government-backed scheme allows you to buy a property with just a 5% deposit and a repayment mortgage with a fixed rate. It’s aimed at first-time buyers who need financial help getting onto the property ladder and existing homeowners who wish to move to a new home. The 95% mortgage guarantee scheme is currently open to new mortgages until 30^th June 2025.

Boost your affordability with a JBSP mortgage

A JBSP mortgage provides a solution to help you get onto or move up the property ladder. For impartial joint borrower sole proprietor mortgage advice, simply give us a call on 01322 907 000. Our mortgage brokers – located throughout Kent, London and Edinburgh – are on hand to discuss your circumstances and answer any questions you may have about the mortgage process. As well as advising you about how a JBSP mortgage works, they can advise you on the alternatives available so that you can compare your options. That way, you can make an informed decision about which mortgage type best fits your needs.

To get in touch with us after office hours, send an email to info@trinityfinance.co.uk or an enquiry via our contact form. One of our mortgage experts will reply to you as quickly as possible with more information about JBSP mortgages and how they can help you buy a home that’s otherwise out of your reach. At Trinity Finance, we also offer a range of other services you can take advantage of, such as arranging your home insurance and mortgage protection.