One of the main issues stopping prospective homebuyers from getting on the property ladder is the deposit requirement. This is especially the case if you’re already paying a high rent, making it almost impossible to save for a deposit at the same time.
Certain mortgages are designed to help first-time buyers meet lenders’ affordability criteria, which removes one financial obstacle. A joint borrower sole proprietor (JBSP) mortgage is one of these.
With this type of mortgage, another person – usually a parent – applies for the mortgage with you and is jointly responsible for making the monthly payments. This is different from a joint mortgage in that the property deeds will be in your name only. But how does this help with the deposit? What amount do lenders require for a JBSP mortgage deposit?
How much do you need to pay for a JBSP mortgage deposit?
Lenders have different requirements when it comes to how much deposit you need to pay. Many are willing to accept a minimum deposit of 5% of the property’s value, while others prefer higher deposits, such as 10%. If you have complex circumstances, such as having bad credit issues, you may be required to pay a higher amount.
The good thing about applying for your mortgage with another borrower is that you can pool your savings to get a bigger deposit. This removes the worry if you haven’t been able to save enough to meet the minimum requirement yourself. If you have already got the deposit you need, then pooling your savings means you can pay an even higher amount.
The more deposit you can pay, the better. This will give you access to more lenders and better deals. These generally come with more competitive interest rates and better terms.
Your deposit funds can come from various sources, such as savings, gifted by someone or an inheritance, in just the same way as deposit funds for a standard residential mortgage. With a JBSP mortgage, each borrower can contribute towards the deposit.
Can you use a gifted deposit for a JBSP mortgage?
Yes, another way to receive help from a family member is with a gifted deposit. This is a sum of money given to you to cover some or all of the deposit. It must be given to you as a genuine gift rather than as a loan that you’re expected to repay at a later date.
The person gifting the deposit funds to you will be required to sign a declaration letter by the lender to confirm this. Signing this letter will also confirm their acceptance that they have no rights over your property. This means that the sole ownership of your home that’s protected with a JBSP mortgage is still protected when accepting a gifted deposit.
Gifted deposit criteria
Lenders vary with their criteria for gifted deposits. For example, some lenders only accept gifted deposits from parents, while some consider other family members, such as siblings or grandparents. Other lenders offer more flexibility than this, accepting gifted deposits from more distant family members, partners or friends.
Another example of the varying criteria is that in some circumstances, lenders may require you to pay some of the deposit from your own funds in addition to the gifted deposit.
Having this type of financial help removes the pressure of having to save a significant sum yourself. It also removes the worry of having to repay a family member or friend at a later date for lending you the deposit money instead.
Consider the additional costs of buying a home
As well as paying a deposit, there are various other costs to budget for when buying a home. These can include valuation and survey fees, your lender’s arrangement fee, legal fees, moving costs and stamp duty, although you can benefit from stamp duty relief as a first-time buyer.
All of these put further pressure on your savings. If you haven’t already accounted for these costs, you may not have as much deposit available as you thought you did.
Discover your JBSP mortgage options
Our mortgage brokers are here to give you expert, impartial advice on joint borrower sole proprietor mortgages. They understand lenders’ varying criteria and can find the best options to suit your financial situation and circumstances. Give us a call on 01322 907 000 to discuss the details and arrange a mortgage in principle.