A joint borrower sole proprietor mortgage is a smart way to increase your affordability when looking for a mortgage. It enables you to strengthen your mortgage application and increase the amount you can borrow by adding additional borrowers (usually family members) to the loan.
In theory, they are great, especially for low-income earners or solo property buyers who need a financial boost, but they can come with their fair share of challenges. In this blog, we explore the ins and outs of JBSP mortgages and help you decide if it’s the right choice for you.
What to consider before applying for a joint borrower sole proprietor mortgage
Adding a family member to your mortgage is a great way to increase your borrowing capacity and meet the lending criteria. However, there’s a lot involved with adding multiple people to a mortgage. You should consider all possible implications for yourself and the other borrowers.
Shared liability
All borrowers have joint responsibility for the mortgage repayments, regardless of who owns the property. This means that the other borrowers must cover any missed payments.
While joint borrowing can help with affordability at the start, you should consider the financial commitment it puts on the non-proprietors who have no legal interest in the property.
Potential relationship breakdown
Joint borrower sole proprietor mortgages rely on trust and communication between everyone involved. Disagreements about finances or property plans can lead to stressful arguments between the joint borrowers – often family members, partners, or friends. Not only can this strain relationships, but it can also make managing shared liability tricky.
Knowing where everyone stands and what is expected of each borrower will help prevent issues down the line. It is also worth getting independent legal advice to give all borrowers peace of mind.
Impact on credit score
Because all borrowers are jointly liable, any missed or late payments will impact everyone’s credit scores. This can make it harder for non-proprietor borrowers to get future loans or mortgages.
Everyone who goes into a joint borrower sole proprietor mortgage should be aware of this, especially if some borrowers are looking to get a mortgage themselves in the future.
Affordability
Even though lenders will do their own assessment, all parties must make sure they can afford the mortgage payments in case of a default. This means considering how future financial challenges, such as job loss or illness, could impact affordability for any of the supporting borrowers.
It is also important to be aware of how a joint borrower sole proprietor mortgage can affect the non- proprietor’s affordability if they, too, want to get a loan or mortgage. The JBSP monthly repayments will be considered in future finance applications.
Are there any tax implications with a JBSP mortgage?
Tax is very complex are and if you’re concerned about the tax implications of a JBSP mortgage, it’s always a good idea to get professional tax advice first.
We do not offer any form of tax or legal advice in relation to taking a JBSP loan.
What happens if the non-owner wants to be removed from the JBSP mortgage later?
While it is possible, removing one of the non-proprietor borrowers during the middle of the mortgage term may not be easy. This usually requires a deed of release, which is a legal document that allows one or more parties to be removed from a previous agreement.
As the property owner, you may also need to prove that you can keep up with the mortgage repayments on your own.
Who is a JBSP mortgage suitable for?
JBSP mortgages are mainly used by parents and family members who want to help their loved ones get onto the property ladder without co-owning the property, but they are also used in many other situations.
- First-time buyers who need extra financial support
- Young professionals who want to borrow more
- People with stable income who can’t get a mortgage due to bad credit history
- Couples where one partner’s financial situation won’t allow them to get a standard mortgage
- Adult children who want to help their parents avoid repossession
If you fit into any of these categories, then a JBSP mortgage might be for you. But before you make any decisions, let’s take a look at the pros and cons of getting a joint borrower sole proprietor mortgage.
Benefits of joint borrower sole proprietor mortgage
Getting a joint borrower sole proprietor mortgage gets you onto the property ladder quicker and with less hassle.
Take a look at some of the benefits that make JBSP mortgages worth it:
- Boost your borrowing capacity by combining your income with multiple borrowers. This can help you borrow more than you could alone, giving you a wider selection of the housing market.
- Being the sole proprietor means you’ll have sole ownership of the property, unlike other mortgage solutions (such as a joint mortgage). You get to make all the decisions for your property, and it’s up to you to decide if and when you want to sell.
- Up to four people can share a JBSP mortgage, which spreads the responsibility and makes monthly repayments less daunting.
- Non-proprietors may not have to pay Stamp Duty or Capital Gains Tax. There are no upfront costs for the other borrowers, making it easier to help out. However you must seek separate tax and legal advice.
- Non-proprietors can be removed from the mortgage as your income grows and your need for additional support lessens.
Drawbacks of a joint borrower sole proprietor mortgage
It’s important to weigh up the positives with potential drawbacks. Getting a JBSP mortgage is a huge responsibility, not just for the legal owner but also for the other borrowers.
Here’s what you should consider before getting one:
- All borrowers are responsible for the mortgage payments, even if they don’t live in the property or have legal ownership. This can affect credit scores and cause financial stress if the sole proprietor misses any payments.
- Finding a mortgage lender who specialises in JBSP mortgages might be difficult. Working with an experienced mortgage broker like Simmonds Mortgage Services can be highly beneficial.
- Some mortgage lenders have upper age limits, which means you might not be able to have older parents or family members on the loan.
- With only the sole proprietor owning the property, the other borrowers still have the same financial risk without any reward.
Interested in seeing if a JBSP mortgage could work for you? Get in touch
Whatever your situation, we’ll find a tailored mortgage solution that works for you. Simmonds Mortgage Services can access the whole market, including high-street mortgage lenders and private specialist lenders.
Let us help you find the perfect JBSP mortgage deal. Call us today on 01184 693 037 or book a meeting with an advisor at a time that suits you.
Frequently asked questions about getting a joint borrow sole proprietor mortgage
Can two first-time buyers be placed on a JBSP mortgage?
Two first-time buyers can be named joint borrowers on a JBSP mortgage, which is a great way for first-time buyers with low incomes to purchase a property. However, only one person will be the legal owner of the property.
Are JBSP mortgages more expensive?
Depending on the lender’s criteria and the complexity of the situation, JBSP mortgages may have higher interest rates. However, purchasing a property with multiple borrowers can make it more attainable for borrowers who otherwise wouldn’t be able to afford it, so in that case, it is the best option.
How are mortgage repayments calculated?
Joint borrower sole proprietor mortgage repayments are calculated based on each borrower’s financial commitment. This could be an equal ratio across all borrowers, or the sole property owner might pay more, with some help from the other borrowers (e.g., 80/20%).
Regardless of the split, all borrowers are equally liable for the entire mortgage.
