What is a Joint Borrower Sole Proprietor Mortgage?
Joint borrower sole proprietor mortgages may sound complicated, but they are simply a type of mortgage that offers another route onto the property ladder for those who may not be able to afford to do so on their own. We have put together all the information you need about this type of mortgage.
What is a joint borrower sole proprietor mortgage?
With a joint borrower sole proprietor mortgage, multiple parties are allowed to borrow the funds for a mortgage, but only one of them becomes the proprietor of that property.
A joint borrower sole proprietor mortgage (JBSP mortgage) enables up to four people to contribute to a mortgage, with only one being listed as the owner. For example, a parent may contribute to their child’s mortgage as part of a JBSP mortgage to help them buy the property, but without becoming a joint owner themselves.
All the parties who contribute to the mortgage are responsible for making the mortgage repayments. If one person is not able to make the repayments, then the other parties are liable to cover those costs between them.
When the initial mortgage period ends, and once the proprietor is in a position to take on the entire mortgage themselves, the other parties can easily exit the arrangement and transfer full responsibility to the proprietor if that is what they desire.
Who can live in a joint borrower sole proprietor mortgage property?
Lenders will usually insist that the person listed on the property deed as the owner also needs to be the person who lives at the property, meaning the other contributors are usually not permitted to live there as well.
The difference between JBSP mortgages and other types of mortgages
A JBSP mortgage isn’t the only type of mortgage that allows prospective buyers to share the financial burden of their investment. Some common mortgages of this type are joint mortgages and guarantor mortgages.
With a joint mortgage, the contributing parties accept joint responsibility for making the mortgage payments and all parties also have a legal claim to the property as owners. However, with a JBSP mortgage, while all contributing parties are responsible for the mortgage payments, only one party is listed as the owner and they are the only one with a legal claim to the property.
Guarantor mortgages are another type of mortgage where an individual can assist the buyer by agreeing to cover the mortgage payments if the property owner falls into arrears. The difference between a guarantor mortgage and a JBSP mortgage is that, with the latter, the other parties contribute to the mortgage from the start and there can be up to four parties, rather than just a single guarantor.
JBSP and Stamp duty
One advantage of a JBSP is that the other contributors do not have to pay second home Stamp Duty even if they already own another property. This is because only one person’s name will be on the deed of the property, meaning the others can avoid a stamp duty surcharge.
What LTV ratios are available for a joint borrower sole proprietor mortgage?
Because a JBSP mortgage involves multiple borrowers with their own affordability and just one property to pay for, a wide range of mortgage loan-to-value ratios and terms are usually available compared to some other mortgage types.
Lenders will assess the affordability of all parties by examining their income, credit, and expenses before the loan is approved, just as with a standard mortgage.
However, it is worth noting that joint borrower sole proprietor mortgages cannot be used in conjunction with housing schemes such as Help to Buy.
A joint borrower sole proprietor mortgage can be a very appealing option for those who want to get on the property ladder or want to buy a bigger property but don’t have the affordability to do so, especially when it is so easy to transfer over to a traditional mortgage once the initial JBSP mortgage period has ended if that suits all parties.
If you need help finding the right mortgage, including joint borrower sole proprietor mortgages, please get in touch and we will be happy to help.