Joint Buyer Sole Proprietor

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Joint Borrower Sole Proprietor Mortgage (Part 1)

James Roberts is here from The Mortgage Company in Nottingham to explain how a Joint Borrower Sole Proprietor mortgage works.

What is a Joint Borrower Sole Proprietor (JBSP) mortgage and how do they work?

They are very similar to normal in that you have two or sometimes three people on the mortgage. But the sole proprietor part means that only one person is going to be the owner of the property. So typically, there are two people on a mortgage and just one of them owns the property.

What responsibilities do the joint borrower and sole proprietor have in a JBSP mortgage?

The joint borrowers are both liable for the mortgage debt and the mortgage payments. Borrowing wise, there’s no real difference. What’s unusual is that only one of those will actually own the property and be on the title deeds.

Who is eligible for a JBSP mortgage? Can I get a JBSP mortgage as a First Time Buyer?

As long as the two borrowers meet the lender’s policy, criteria, income assessments and affordability, anybody is eligible.

For First Time Buyers, that’s often where this helps. Quite often you might have a First Time Buyer who doesn’t quite earn enough to get the property they are after. They might have a parent, brother or sister go on the mortgage with them to help them borrow enough. First Time Buyers can certainly take advantage of these schemes.

What criteria do you need to meet for a JBSP mortgage?

It’s a lender’s normal criteria – although not every lender offers JBSP mortgages. Among those that do, the criteria generally is the same, whether both borrowers are going on the deeds or just one.

What the lender’s really interested in is whether the two borrowers meet their criteria and policies around underwriting and affordability. You just have to meet their standard criteria.

There’s potentially one added part, that the borrower that’s not going on the title deeds might need additional legal advice. They’re about to become liable for a mortgage with no stake in the property, so they need to be clear about the implications of that.

Do JBSP mortgages require a large deposit compared to standard mortgages?

No, not at all. The lenders that offer JBSP mortgages often have the same rates as any other products. A few lenders do have slightly different rates, but that doesn’t mean they need more or less deposit than normal.

Do you pay stamp duty on a JBSP mortgage?

The main point is that any stamp duty that might be applicable is only linked to the sole proprietor. They’re the sole person buying the property, so any stamp duty implication falls on them.

However, stamp duty is a government tax and it can change all the time. It’s something that the sole proprietor would check with their solicitor. It’s all down to government rules at the time – but will purely be based on that sole proprietor’s situation.

Can you have a sole mortgage on a joint property?

No, lenders wouldn’t allow you to have a sole mortgage on a joint property.

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What’s the difference between a joint mortgage and a JBSP mortgage?

In terms of the mortgage itself, there’s very little difference, as we’ve already discussed. The rates, underwriting, the criteria, policies… all of that is the same in each case.

The fundamental difference is that on a JBSP mortgage, only one person is going to be named on the title deeds, so only one person becomes an owner of the property.

What’s the difference between a guarantor mortgage and a JBSP mortgage?

In terms of underwriting from a lender’s point of view, again there’s not a great difference, but most lenders don’t do guarantor mortgages anymore.

JBSP mortgages came in to give the lender a bit more security – because the ‘guarantor’ is now named on that mortgage. It’s quite clear they are liable for that debt and that payment.

It’s better for the lender and gives more clarity to that borrower about what they are liable for. They will continue to be liable unless they come off the mortgage.

What are the pros and cons of a JBSP mortgage?

The biggest advantage is to allow that sole proprietor to borrow more money than if the mortgage was in their sole name. That additional person adds their income to increase affordability, based on the model that a lender uses. That is the big advantage.

One potential downside comes in where the additional borrower is a parent of the sole proprietor. The parent’s going to be older, so while there’s the chance to borrow more money, lenders tend to have criteria around the maximum age and term for a mortgage.

Often, you then have to shorten the mortgage term to allow for that older person’s age. So you might be able to borrow more, but it could be over a shorter term – and that increases the mortgage payments. We’re squeezing that mortgage into fewer years.

What else do we need to know about a JBSP mortgage?

With a lot of Joint Borrower Sole Proprietor mortgages, the borrower who is not going to own the property – who is not the sole proprietor – will have to get independent legal advice.

The buyer will have their main solicitor for all the normal checks and searches associated with purchasing a property. But the joint borrower has to appoint a separate solicitor for independent legal advice, to make sure they know their liabilities in this situation. Basically, it means the legal costs could increase, because another solicitor gets involved.

A final point to make is that that joint borrower can’t just decide to stop being part of the JBSP. The mortgage lender needs to accept that the sole proprietor is now eligible to take that mortgage on by themselves. The joint borrower will remain liable for that debt and mortgage payments until the sole proprietor meets the lender’s policy – at that point, the joint borrower can be removed.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

For specialist tax advice, please refer to an accountant or tax specialist.