Mortgage affordability can be challenging, especially for first-time buyers or those with unique financial situations. One option that has gained popularity in recent years is that of Joint Borrower Sole Proprietor mortgages.

It’s becoming more common for families and even friends to look for ways to help each other.

This type of mortgage allows multiple people to apply for a loan together, even though only one person owns the property.

What is a Joint Borrower Sole Proprietor Mortgage?

A JBSP mortgage is designed to help individuals, often first-time buyers, get on the property ladder by allowing them to include the income of a family member or friend in their mortgage application. 

In simple terms, this could help increase the amount that someone can borrow when compared to applying in their own name. 

With a JBSP mortgage, the joint borrowers are responsible for the mortgage repayments, but only one of them, the sole proprietor, owns the property.

How do Joint Borrower Sole Proprietor Mortgages Work?

1. Application Process:
   • The sole proprietor applies for the mortgage with one or more joint borrowers.
   • The income and financial status of all applicants are considered by the lender to determine the borrowing limit.
2. Ownership:
   • The sole proprietor holds the title to the property.
   • The joint borrowers do not have any ownership rights but are liable for the mortgage repayments.
3. Mortgage Repayments:
   • All borrowers are equally responsible for the monthly mortgage payments.
   • If one borrower fails to make a payment, the other(s) must cover it.

Benefits of JBSP Mortgages

1. Increased Borrowing Power:

By including additional incomes in the mortgage application, borrowers can access larger loans than they might qualify for individually. This could mean more choice when looking for a property.

2. Helping First-Time Buyers:

JBSP mortgages are particularly beneficial for first-time buyers who may not have a sufficient income to buy a property on their own.

3. Avoiding Joint Ownership:

This arrangement allows family members to help without becoming co-owners, avoiding potential complications in ownership rights and meaning that additional Stamp Duty may not be payable.

Considerations and Potential Drawbacks

1. Financial Responsibility:

All borrowers are jointly and severally liable for the mortgage repayments. If the sole proprietor struggles with payments, the joint borrower(s) must cover the shortfall.

In addition, if the joint borrower is looking to take out further credit and/or mortgage in the future, the JBSP mortgage will be taken into account as a liability.

2. Impact on Credit Scores:

Late or missed payments can affect the credit scores of all borrowers involved.

3. Exit Strategy:

It’s crucial to have a clear plan for how and when the joint borrowers will exit the arrangement, especially if their financial circumstances change.

4. Legal and Tax Implications:

While the joint borrower doesn’t own the property, there may still be legal and tax considerations to address. Consulting with a legal or financial adviser is recommended.

Who Can Benefit from Joint Borrower Sole Proprietor Mortgages?

1. First-Time Buyers:

JBPS mortgages can be favourable to First Time Buyers who have insufficient income to get onto the housing ladder due to affordability.

However, it’s important to have a viable exit strategy with a view to the borrower(s) being able to support the loan in their own name(s) as soon as possible.

An example could be young professionals or recent graduates who may have insufficient income now, but have a good likelihood of a significant increase in earnings in the future.

2. Families:

Parents wanting to help their children buy a home can use JBSP mortgages without taking ownership themselves.

Using a JBSP mortgage could also be a useful alternative to other ways of helping such as gifting deposits, if the funds are of better use or needed elsewhere.

3. Older Borrowers

In some cases, JBSP mortgages can be used by Children to help parents who may need a mortgage in later life.

For example, if the parents may have an interest only mortgage that has come to the end of its term. They may not want to repay the loan, but don’t meet the income / affordability requirements to take out another mortgage.

Steps to Take When Considering a JBSP Mortgage

1. Evaluate Your Financial Situation:
   • Assess your income, debts, and long-term financial plans. Make sure that all parties involved fully understand and are comfortable with the responsibilities.
2. Consult a Mortgage Adviser:
   • A professional can help you understand the finer details of  JBSP mortgages and find the right lender for your needs.
3. Understand the Legal Implications:
   • Consider speaking with a legal advisor to understand the implications fully, including what happens in the event of default or a change in circumstances.
4. Plan for the Future:
   • Have a clear exit strategy. Discuss how and when the joint borrowers will be removed from the mortgage, and under what conditions.

Conclusion

Joint Borrower Sole Proprietor mortgages can be a valuable tool for those who need additional financial support to purchase a property without joint ownership.

By leveraging the income of family members or friends, borrowers can increase their borrowing power and achieve homeownership. 

However, it’s important to carefully consider the responsibilities and potential risks involved. 

When used properly and with the help of professional advice, a JBSP mortgage can be a way to help family and friends get the homes they really want.