Are you struggling to pass the affordability checks for a mortgage due to having a low income or bad credit rating? A joint borrower sole proprietor (JBSP) mortgage may be just the solution you’re looking for. It allows you to apply for a mortgage with someone else but benefit from having sole ownership of your home.
This may seem too good to be true but a JBSP mortgage is specifically designed to help you buy a property when you’re not in a position to do so on your own. At Trinity Finance, we work closely with lenders offering this specialist mortgage and are ready to help you get onto the property ladder with the support of a loved one or friend to increase your affordability.
What is a joint borrower sole proprietor (JBSP) 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. Applying for a mortgage with someone else takes their income and credit score into account. Combining your incomes allows you to borrow more and 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 ownership of it, although a JBSP mortgage isn’t restricted to just your family members.
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. 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. 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 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.
As mentioned above, up to four applicants can apply. This significantly boosts your affordability and means the mortgage repayments are made between you all even though you are the only legal owner of the property. Bear in mind that not all lenders take each applicant’s income into account — some only consider the incomes of two applicants. 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.
Stamp duty benefits
When buying a property as a first-time buyer, you are exempt from paying stamp duty up to the property value threshold of £300,000. If the person entering into the JBSP mortgage with you is already a homeowner, they are exempt from the second property stamp duty surcharge as they are not a legal owner of the property. The stamp duty surcharge is 3% so a JBSP mortgage saves a considerable amount of money in this respect compared with other mortgage types, such as a joint mortgage.
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 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 email@example.com or an enquiry via our contact form and we’ll reply to you as quickly as possible with more information.
The pros and cons of JBSP mortgages
As with any mortgage, there are pros and cons to consider and we’ve detailed them below for you.
- 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.
- Each borrower is jointly and severally liable for the mortgage repayments.
- 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.
- If any mortgage repayments are late or missed, both of your credit ratings will be affected.
- You can’t apply for financial assistance via one of the government-backed schemes with a JBSP mortgage.
- The age limit set by the lender may affect the other borrower’s eligibility.
- Being financially obligated to a JBSP mortgage, the other borrower may have difficulty getting another loan.
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. 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. In the event of your death, 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.
How does a JBSP mortgage differ from a joint mortgage?
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 but only you can be named on the title deeds. 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. 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.
Boost your affordability with a JBSP mortgage
For impartial advice on JBSP mortgages, 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 tell you about the alternatives available and help you decide which type best fits your needs.
With a guarantor mortgage, for example, your parent – or other relative or 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. The Help to Buy: Shared Ownership scheme enables you to use your deposit and a mortgage to buy a percentage of a property – between 25% and 75% of its value – and pay rent at a discounted rate on the remaining value. 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, providing the lender with security. We’ve already mentioned a joint mortgage above and there’s also the 95% mortgage guarantee scheme to consider, which allows you to buy a property with just a 5% deposit and a repayment mortgage with a fixed rate.
To get in touch with us after office hours, send an email to firstname.lastname@example.org 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 get onto the property ladder.