Everything You Need to Know About Joint Borrower Sole Proprietor Mortgages

As a sole proprietor in the UK, it can be challenging to secure a mortgage as lenders often require proof of consistent income and strong credit history. However, if you have a family member or trusted friend who is willing to act as a joint borrower, you may be able to increase your chances of obtaining a mortgage with a JBSP arrangement.

In this type of mortgage, the joint borrower’s income and creditworthiness are taken into account alongside the sole proprietor’s, allowing for a larger loan amount or more favourable interest rates. In this article, we will explore the benefits and considerations of JBSP mortgages and how they can help sole proprietors achieve their homeownership goals.

Post Topics

Our Guide to Joint Borrower Sole Proprietor Mortgages

What are joint borrower sole proprietor mortgages?

Why is joint borrower are sole proprietor mortgages becoming popular in the UK?

Are joint borrower sole proprietor mortgages purely for first-time buyers?

What are the pros and cons of JBSP mortgages?

What is the Application process for Joint Borrower Sole Proprietor Mortgages?

What term can the mortgage be taken over?

Are joint borrower sole proprietor mortgages only for residential products?

What do I need to bear in mind with a JBSP mortgage?

Next steps – joint borrower sole proprietor mortgages

FAQs

Few people will be unaware of the difficulties faced by some potential buyers in the UK Property market over recent years. High property prices, lenders requiring higher deposits and tighter control of borrowing versus income have all meant that times can be tough for certain categories of buyers. That particularly applies in the case of younger first-time buyers.
Fortunately, a new approach called joint borrower sole proprietorA mortgage where two or more borrowers are jointly responsib... mortgages or JBSP has been developed to help.
Here is our summary of the key characteristics of this new approach.

What Is a Joint Borrower Sole Proprietor Mortgage?

At face value, these appear to be complicated, but in reality, they are quite straightforward.

It might be best illustrated by considering a typical situation – that where a young first-time buyer has an income that is too low to generate sufficient mortgage sums to buy a property based upon standard income multiples.

At one time, that younger person may have turned to their parents for assistance. That might have been in the form of a cash injection or, in some cases, the parents acting as guarantors for a higher sum.

However, recent taxation changes have made that option less appealing, so both parents and lenders have been looking for alternative approaches.

How Does It Work?

Joint borrower sole proprietor mortgage lenders offer a product that simply includes another person’s income, perhaps of the parent in this example, as part of the overall maximum lendable amount calculations for the primary applicant. What this means is that the sum advanced as a mortgage is based upon perhaps two, three or even four incomes rather than just one.

That, in itself, is not unusual, as joint mortgages are nothing new, but JBSP is radically different. That’s because the second income used in the calculation does not result in that contributing individual being included in the property’s deedsLegal documents that prove ownership of a property. of ownership.

Stamp duty

Well, the big advantage of this, both to the property purchaser and to whoever is assisting them to achieve the required mortgage level, is that in many circumstances, this will not count as a second property purchase for the assisting income provider. That means no stamp duty will be payable under second homeA property that is purchased as a second home or holiday hom... purchase auspices (in qualifying circumstances).

Other current incentives and taxation advantages for first-time buyers will still apply.

It is worth noting that if the person who is jointly on the mortgage but not on the legal title deed is a spouse or civil partner and owns another property which they are not selling to buy the new property, then second home stamp dutyA tax paid by the buyer when purchasing a property. typically WOULD BE payable.

Why is joint borrower are sole proprietor mortgages becoming popular in the UK?

Joint borrower sole proprietor mortgages are becoming increasingly popular in the UK due to several reasons. Firstly, many sole proprietors find it challenging to meet the strict requirements of traditional mortgage lenders, such as demonstrating consistent income over a prolonged period and a strong credit history. This can make it difficult for them to secure a mortgage on their own.

However, with a JBSP mortgage, a family member or trusted friend can act as a joint borrower, and their income and creditworthiness are taken into account alongside the sole proprietor’s. This can increase the chances of being approved for a mortgage and also potentially result in more favourable interest rates.

According to data from Legal & General Mortgage Club , the number of JBSP mortgage products available in the UK market increased by 45% between 2018 and 2020. This trend suggests that more lenders are recognizing the demand for alternative mortgage arrangements for sole proprietors who may not meet traditional lending criteria.

Furthermore, the COVID-19 pandemic has also contributed to the rise in Joint mortgages in the UK. With many people facing financial uncertainty due to job losses or reduced income, having a joint borrower on a mortgage application can provide additional security and reassurance for lenders.

Overall, the growing popularity of JBSP mortgages in the UK can be attributed to their flexibility and the increased accessibility they provide for sole proprietors who may have struggled to secure a mortgage otherwise.

If you are a first-time buyer and interested in getting a JBSP mortgage and starting onto the property ladder, you can contact the specialist mortgage broker to help you with your mortgage application.

Are joint borrower sole proprietor mortgages purely for first-time buyers?

Although illustrations of how they work are often cited in the context of first-time buyer examples, there is no such restriction.

For example, if two people were trying to purchase property using this type of mortgage provision and one of them already owns another property, they may wish to keep the existing property-owning contributor’s name off of the deeds to avoid stamp duty.

However, the specific taxation issues a might apply in a given application can be complicated and are best discussed with the exact facts on the table.

What are the pros and cons of JBSP mortgages?

Comprehensive Guide to Joint Borrower Sole Proprietor (JBSP) Mortgages

What is the Application process for Joint Borrower Sole Proprietor Mortgages?

The application process for joint borrower sole proprietor (JBSP) mortgages in the UK is similar to that of a traditional mortgage, with a few additional steps to include the joint borrower.

Here are the general steps involved in the JBSP mortgage application process:

1. Research lenders and mortgage products: Research lenders that offer JBSP mortgages and compare their products and interest rates to find the most suitable one for your needs.
2. Assess affordability: Use an online affordability calculatorWhat is an Affordability Calculator? An affordability calcul... to determine how much you can borrow and how much the monthly mortgage payments will be.
3. Gather necessary documents: Gather all the necessary documents such as proof of income, tax returns, bank statementsA record of a borrower's financial transactions often requir..., and identification documents for both the sole proprietor and joint borrower.
4. Submit the application: Complete and submit the mortgage application with all the required documents to the lender. Both the sole proprietor and joint borrower will need to complete and sign the application form.
5. Underwriting and approval process: The lender will review the application and assess the creditworthiness of both the sole proprietor and joint borrower. They will also conduct a property valuation to ensure the property is worth the purchase price. The lender may request additional documentation or information during this process.
6. Offer and acceptance: If the application is approved, the lender will make a mortgage offer. Both the sole proprietor and joint borrower will need to review and accept the offer before proceeding.
7. CompletionThe point at which a property purchase is finalized and owne...: Once the offer is accepted, the solicitor will arrange for the legal completion of the mortgage. This involves the transfer of funds and ownership of the property to the borrower(s).

It is important to note that the application process may vary depending on the lender and individual circumstances. Some lenders may require a joint borrower to have a higher credit score or income level than others, and the application process may take longer if additional documentation or information is required. If you are interested in starting on a property ladder in the UK, you can contact an independent mortgage broker.

What term can the mortgage be taken over?

While the term and other product features vary depending on the lender, in some cases, this type of mortgage can be taken out up to a maximum age at the end of the mortgage term of 80 years of age.

That means that the repayments can be spread over a longer period and therefore be lower, on a monthly basis, than the traditional mortgage terms of 20 or 25 years.

How many applicants can be considered?

It’s possible to use up to four incomes to support a single mortgage application in the context of this type of product.

Are joint borrower sole proprietor mortgages only for residential products?

No. Again, although many examples use residential situations as their focal point, in fact, this type of mortgage may also be available in buy-to-let situations.

What do I need to bear in mind with a JBSP mortgage?

It is important for the person agreeing to support a mortgage application whilst not taking any share in the title of the property to realise a number of key factors about the responsibility they are undertaking:

• In any event, where the principal borrower defaults on the loan, you will be held liable with them for the recovery of any debts. The fact that your name does not appear on the title deeds will not affect your liabilities in that respect at all;
• your debt liabilities here would need to be declared in situations where you were applying for other loans, even if the primary mortgage holder and property owner were normally meeting all mortgage repayments entirely from their own sources each month;
• to take on what may be a very substantial debt without having any legal rights over the asset it is secured against might be a significant risk. Having total trust and confidence in the primary mortgage borrower (and legal property owner) is obviously of paramount importance, but you may also wish to consider taking additional legal steps, such as a deed of trust, in order to protect your interests;
• even as a second applicant, joint borrower sole proprietor mortgage lenders will require you to pass things such as income and affordability qualifications. You will also typically need to meet the criteria of the credit reference check.

Next steps – joint borrower sole proprietor mortgages

Joint borrower sole proprietor mortgages are very new and potentially highly beneficial for certain categories of mortgage applicants.

The way they operate can take a little getting used to, and this is where we will be only too happy to offer our assistance in explaining them in a little more detail.

Why not contact us at your earliest convenience for a further discussion?

FAQs 

Q1: What is a Joint Borrower Sole Proprietor (JBSP) mortgage?

A JBSP mortgage is a mortgage arrangement where multiple people (e.g., parents and children) contribute to the mortgage payments, but the legal ownership of the property remains with one person, known as the sole proprietor. This structure can be especially helpful for increasing borrowing capacity without the need for all contributors to be legal owners.

Q2: Who can benefit from a JBSP mortgage?

This type of mortgage is ideal for individuals, such as first-time buyers, who may need support from family members to increase their household income and meet affordability calculations. It’s particularly helpful for those with stable incomes but who need to boost their borrowing capability by adding additional borrowers without giving up legal title.

Q3: How does a JBSP mortgage affect stamp duty?

As the sole proprietor, you may be eligible for the first-time buyer stamp duty exemption or reduced rate of stamp duty. However, your eligibility depends on your personal situation, such as whether you qualify for the buyer stamp duty allowance.

Q4: What is the difference between a JBSP mortgage and a guarantorA person who guarantees to repay a mortgage if the borrower ... mortgage?

A JBSP mortgage involves joint responsibility for mortgage repayments but grants single ownership to one person, while a guarantor mortgage provides financial backing without granting any legal claim to ownership. Both options help increase borrowing capacity, but a JBSP mortgage offers more flexibility for combined incomes and shared repayment responsibility.

Q5: What are the risks of a JBSP mortgage?

All contributors are responsible for the mortgage debt, even if they don’t hold the legal title. This creates a credit risk for all involved, as missed monthly payments could affect their credit profile and chance of mortgage approval in the future. Legal advice is essential to understand your legal responsibility.

Q6: How do JBSP mortgages work with age limits and eligibility?

Most mortgage providers, including building societies like Skipton Building Society, Family Building Society, and Newcastle Building Society, have upper age limits for JBSP mortgages. It’s important to check with your mortgage advisor to see how age limits may affect your eligibility.

Q7: What types of mortgage products are available for JBSP?

You can find JBSP options from specialist lenders offering variable rate mortgages, fixed-rate mortgages, and even buy-to-let JBSP mortgages. The type of mortgage you choose will depend on your financial position, house prices, and your need for cheaper mortgage deals.

Q8: How do I apply for a JBSP mortgage?

You’ll need to undergo affordability assessments and provide documentation such as proof of income, bank details, and pass credit checks. It’s crucial to consult with a CeMAP-qualified mortgage advisor to explore alternative mortgage options and find the right lender from a list of lenders, like Foundation Home Loans or Bath Building Society.

Q9: Can JBSP mortgages be used for remortgageRefinancing an existing mortgage with a new mortgage. applications?

Yes, JBSP mortgages are available for remortgages, including situations involving essential home repairs or new-build homes. When remortgaging, it’s important to discuss with a qualified mortgage broker to explore whether switching products with your current lender, like a Product Switch, would suit your needs.

Q10: Are JBSP mortgages available for properties beyond residential mortgages?

While JBSP mortgages are primarily intended for residential property, some specialist lenders may offer options for mixed-use property or multi-occupancy properties. Be sure to discuss your needs with a mortgage advisor to understand what options are available for your choice of properties.

Q11: How do I improve my chance of mortgage approval with a JBSP mortgage?

Ensuring your credit profile is strong, maintaining stable incomes, and using an affordability calculator to understand your borrowing capability can increase your chances. It’s also essential to work with a mortgage advisor to identify the best mortgage providers and range of mortgage products that suit your needs.

Q12: What is the role of legal advice in a JBSP mortgage?

Before completing a JBSP mortgage, all parties involved—especially non-legal owners—must receive Independent Legal Advice. This ensures that each person understands their legal responsibility and potential risk for lenders. It’s important to get bespoke advice tailored to your unique circumstances.

Q13: Are there any government-backed schemes that work with JBSP mortgages?

While JBSP mortgages are not directly part of government schemes, they can be a good alternative to government-backed schemes like Help to Buy, as they allow for the use of combined incomes to improve borrowing capability. Discuss with your mortgage advisor if this might be a better option for buyers.

Q14: Can I get a JBSP mortgage with bad credit?

Although having bad credit can limit your options, there are bad credit mortgages available through specialist lenders. Be prepared for more rigorous affordability criteria and higher Mortgage Rates. Working with a qualified mortgage broker can help you find a suitable lender.

Q15: What are early repayment charges in a JBSP mortgage?

Many JBSP mortgages include repayment charges if you pay off the mortgage early or switch products mid-term. Lenders like Bath Building Society and Rugby Building Society may charge a fee, so always check the lender’s policy on Product Switches and any associated costs, such as early repayment charges.