Joint Borrower Sole Proprietor Mortgages
If you are finding it tricky to get a mortgage on your own, perhaps due to insufficient income, you could consider buying with someone else. You might not want to jointly own a property with someone else but there is a mortgage option that could work for you to help you get on the property ladder.
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What is a joint borrower sole proprietor mortgage (JBSP)?
A joint borrower sole proprietor mortgage (JBSP) is a type of mortgage product that allows multiple individuals to apply for a mortgage together, with only one or two of them listed as the legal owners of the property.
This product enables individuals who may not meet the stringent income or credit requirements on their own to obtain financing with the support of additional borrowers.
How do joint borrower sole proprietor mortgages work?
The sole proprietor or sole name on the deeds, is the legal owner of the property and takes responsibility for maintenance and upkeep. The joint borrower or borrowers support the legal owner in their application by agreeing to help with mortgage payments. They bring their assets and income to back up the sole proprietor’s application. The joint borrowers are not legal owners and have no legal claim to the property. Their names do not go on the deeds.
A joint applicant is typically a parent, grandparent or other family member who will help with making mortgage payments using their combined income with the sole proprietor. Both have joint responsibility for ensuring that monthly repayments are made on time but only the sole proprietor can make decisions about the property, such as deciding to sell.
What is the mortgage application process for JBSP?
The mortgage application process for a JBSP mortgage is similar to that of a traditional mortgage. The primary applicant and joint borrowers gather the necessary documentation, including proof of income, bank statements, identification, and credit history. They will need to complete a mortgage application and submit it to the mortgage lender.
During the application review process, the lender evaluates the combined financial profiles of all applicants to assess the overall affordability and creditworthiness against their lending criteria. If approved, the sole proprietor will take legal responsibility for the property, while all applicants are equally responsible for the mortgage repayments. Some mortgage lenders will approve up to four applicants on the same loan.
Joint borrower sole proprietor mortgage eligibility
To be eligible for this type of mortgage, all applicants must meet all the criteria set by the lender. It may be more difficult to meet all the lending criteria when you have more than one person applying. Specific requirements may vary depending on the lender, so consult a mortgage advisor to understand the different products available.
Can a first time buyer get a joint borrower sole proprietor mortgage?
Yes, some lenders offer JBSP mortgages to first time buyers.
Can a married couple get a joint borrower sole proprietor loan?
Yes, a married couple may be able to get a JBSP mortgage with one party having sole ownership and the other as the supporting borrower, also known as non proprietor. With many mortgage lenders, there is no stipulation that there be a close family relationship between the sole owner and the non legal owner for them to borrow money together.
Can a guarantor cover mortgage payments in a JBSP mortgage?
A guarantor on a mortgage agrees to become responsible for making monthly payments only if you, as the legal owner are unable to make the payments.
What is the difference between a joint mortgage and a joint borrower sole proprietor mortgage?
A joint mortgage means that both borrowers have legal ownership of the property unlike a JBSP where there is only one legal owner. Joint mortgages create a beneficial interest in the property for all borrowers, whereas JBSP products do not.
What is the difference between a guarantor mortgage and a joint borrower sole proprietor mortgage?
A guarantor mortgage is where someone else, usually family members, agrees to take on responsibility for your monthly payments if you are unable to keep up repayments. Guarantor mortgages give no rights of ownership to the guarantor just like a JBSP mortgage. A guarantor tends to be a parent.
Is there a stamp duty liability for joint borrowers?
Stamp duty is a complex subject so we always request you seek independent tax advice. If your name does not go onto the deeds, then your circumstances usually don't go towards the stamp duty liability however this is different for married couples. For example a first time buyer, with a parent supporting the mortgage via JBSP or guarantor would usually pay first time buyer stamp duty rate as the person not on the deeds is then ignored. however tax is complex and we do not advice in this area so please seek advice.
What are the risks involved?
As with any financial arrangement, you should assess the potential downsides. Joint borrowers might fall out making it difficult to maintain the financial relationship. If you have older borrowers, this could limit the mortgage term making monthly repayments higher than standard mortgages.
Being jointly liable for a larger mortgage could put your relationship under significant strain so think carefully about whether this is the right approach for your and your joint borrowers.
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