Joint Borrower Sole Proprietor (JBSP) Mortgage

What is a JBSP mortgage?

A joint borrower sole proprietor mortgage is designed to help people secure a mortgage who don’t quite have the income that is required but have the assistance of a friend or family member.

A JBSP mortgage allows multiple people to be named on the mortgage for affordability purposes and their incomes considered. However, only one of the applicants is named on the title deeds and owns the property.

Most lenders will insist that only one person lives in the property.

How does a JBSP mortgage work?

It’s often the parents that have their names added to provide the support needed, however, some lenders allow close relatives or friends to be named. All parties are liable for the monthly payments, and if one party were not to pay their share, the other parties would need to cover the costs or risk impairing their credit score.

What is the criteria for a JBSP mortgage?

Just like a regular mortgage application, all applicant’s income and outgoings will be considered, including their existing mortgage or rent payments. The maximum mortgage term will generally be based on the age of the eldest applicant; therefore, the mortgage term may be restricted for cases where elder parents or family members are named on the mortgage.

For example, if a 30-year-old applicant were to add their 62-year-old parent to the mortgage, they may only be able to borrow until the parent’s retirement age, therefore impacting the amount they can borrow and potentially significantly increasing monthly payments. If the parents are borrowing based on their retirement income, then longer terms will likely be available.

Do you pay stamp duty on a JBSP mortgage?

JBSP mortgages came to prominence following the Government’s announcement in 2016 to introduce an additional 3% stamp duty surcharge for people purchasing a second property. Prior to 2016, a regular joint mortgage would have been used in situations where an additional income is required to bolster an applicant’s application.

On a regular joint mortgage, both applications would be named on the title deeds and, therefore, stamp duty based on the status of both applicants. On a JBSP mortgage, only one applicant is named on the title deeds and stamp duty is based on their status.

A buyer’s homeowner status can have a significant impact on the stamp duty liability. At the time of writing (15th February 2023), the stamp duty for a first-time buyer purchasing at £300,000 would be zero and for a second home purchase, £11,500. If a first-time buyer were to purchase a property with an existing homeowner, they could potentially save £11,500 in stamp duty purchasing with a JBSP mortgage instead of a regular joint mortgage.

What are the pros and cons of a JBSP mortgage?

It’s important to carefully consider the specific terms and conditions of a JBSP mortgage and seek professional advice to fully understand the implications before proceeding with this type of arrangement.

Here are some pros and cons of a JBSP mortgage:

Pros of a JBSP mortgage

• Increased borrowing capacity: A JBSP mortgage allows the income and financial strength of multiple borrowers to be considered, which can increase the borrowing capacity and make it easier to qualify for a larger loan.
• Access to better interest rates: With multiple borrowers, lenders may offer more favourable interest rates based on their combined financial profiles, potentially resulting in lower monthly mortgage payments.
• Shared responsibility: All borrowers are jointly responsible for making mortgage payments, which can help distribute the financial burden and make it more manageable.
• Opportunity for first-time buyers: JBSP mortgages can be particularly helpful for first-time buyers who may not qualify for a mortgage on their own but have a family member or partner willing to co-sign the loan.

Cons of a JBSP mortgage

• Legal and financial implications: All borrowers are equally liable for the mortgage, meaning if one borrower defaults or fails to make payments, it can negatively impact the credit scores and financial situations of all borrowers involved.
• Limited ownership rights: In a JBSP mortgage, only one borrower is listed as the sole proprietor, meaning only that person has legal ownership rights to the property. The other borrowers may not have any ownership rights unless specifically outlined in the legal agreements.
• Potential strain on relationships: Entering into a mortgage with multiple borrowers can create financial and emotional dependencies. If there are disagreements or difficulties in meeting mortgage obligations, it can strain relationships between the borrowers.
• Limited future options: A JBSP mortgage can complicate matters if one borrower wishes to sell their share of the property or wants to buy a new property in the future. It may require refinancing or renegotiating the mortgage terms.

Can I remove someone from a JBSP mortgage?

Yes, once you’re in a position where you can afford the mortgage in your own name, you could apply to remove the other applicant from your existing mortgage or remortgage to a new lender in your sole name.

You will need to meet the lender’s criteria and affordability assessment based on your own income.

Will I need a bigger deposit with a JBSP mortgage?

Most lenders will require a minimum 15% deposit for a JBSP mortgage, and some consider 10%.

5% deposits for a JBSP mortgage are less common.

Which lenders offer JBSP mortgages?

Many lenders offer Joint Borrower Sole Proprietor (JBSP) mortgages, including mainstream and specialist lenders. Some examples include:

• Clydesdale
• Metro
• Barclays
• Skipton
• Furness

What alternatives to JBSP are there?

Here are some of the alternatives to a JBSP mortgage. Here’s some more information about each:

• Buy alone: You could choose to buy a property on your own, which may be more affordable but could limit the size or location of the property you can purchase.
• Wait and save: You could choose to wait and save up a larger deposit to increase your chances of being approved for a mortgage on your own.
• Gifted deposit: You could receive a gifted deposit from a family member or friend to increase the size of your deposit and improve your chances of getting approved for a mortgage on your own.
• Shared ownership: You could choose to purchase a property through a shared ownership scheme, which allows you to buy a portion of the property and pay rent on the remaining share.
• Joint mortgage: You could choose to apply for a joint mortgage with another borrower who will also be responsible for making repayments on the loan.
• Guarantor mortgage: You could have a family member or friend act as a guarantor for your mortgage, which means they agree to cover the repayments if you are unable to make them yourself.

Can I get a Buy to Let JBSP mortgage?

Yes, some lenders do offer a buy-to-let joint borrower sole proprietor (JBSP) mortgage. This type of mortgage is similar to a regular JBSP mortgage, but it is designed for those who want to purchase a buy-to-let property with a co-borrower, but only one person will be the legal owner of the property.

This can potentially save thousands of pounds in additional stamp duty if the co-borrower already owns another property and does not want to be named on the title deeds.

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

A JBSP mortgage is a mortgage where two or more borrowers are jointly responsible for the mortgage payments, but only one borrower is named as the sole proprietor of the property. This is often used in situations where one borrower has a higher income and can afford a larger mortgage, but the other borrower(s) may not have enough income to be named on the mortgage. This can help increase the amount that can be borrowed as the lender takes into account the income and creditworthiness of all borrowers.

A guarantor mortgage, on the other hand, is where a third party (usually a family member) guarantees the mortgage payments if the borrower is unable to make them. The guarantor is not named on the title deeds and does not have a legal interest in the property. This can help someone with a lower income or a limited credit history to get a mortgage, as the guarantor provides additional security to the lender.

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

A joint borrower sole proprietor (JBSP) mortgage allows more than one person to be named on the mortgage but only one person to be named on the title deeds. This means that only one person is responsible for the legal ownership of the property.

In contrast, a joint mortgage allows multiple borrowers to be named on both the mortgage and the title deeds, meaning all borrowers can be used for affordability purposes.

How many people can be named on a JBSP mortgage?

The number of people who can be named on a joint borrower sole proprietor mortgage can vary between lenders, but generally, up to 4 people can be named. However, in most cases, only the income of 2 or 3 of the borrowers can be used for affordability purposes

What’s the maximum age for a JBSP mortgage?

The maximum age for a joint borrower sole proprietor (JBSP) mortgage varies among lenders, but it’s typically capped at age 70 to 75 based on the age of the eldest borrower. Some lenders may allow borrowers up to age 80.

It’s important to check with the individual lender as their criteria may vary.

How much can I borrow on a JBSP mortgage?

The affordability of a JBSP mortgage is the same as a Joint mortgage. However, there are likely to be two residential costs to consider, either another mortgage or rental costs, which can have a massive impact on affordability.

Often, the other borrower is an elder relative, so the terms can be restricted, which can limit affordability as well. To find out your affordability, it’s best to speak to a broker.

What are the rates?

The rates for a JBSP mortgage will vary depending on your circumstances and the market conditions. Not all lenders offer them, so you will have a more limited choice than on a traditional mortgage. Additionally, some lenders have specific JBSP mortgage products, which can have higher rates.

What else to consider on a JBSP mortgage?

There’s a lot to consider when taking out a JBSP mortgage. Here are a few things to think about.

• Seek legal advice: As with any major financial commitment, it is important to seek legal advice before entering into a JBSP mortgage agreement. A solicitor can help you understand the legal implications of this type of mortgage and ensure that you fully understand your obligations.
• Consider other options: While a JBSP mortgage can be a good solution for some borrowers, it is important to consider other options as well. For example, you may be able to save up a larger deposit to qualify for a traditional mortgage or explore other types of guarantor or joint mortgages.
• Plan an exit strategy: Before entering into a JBSP mortgage, it is important to have a clear exit strategy in place. For example, if the person named on the mortgage but not residing in the property wants to be removed in years to come, will you be able to remortgage or need to sell the property?
• Take out insurance: To protect yourself and your co-borrower, it is important to take out appropriate insurance. This could include life insurance, critical illness insurance or income protection insurance.
• Plan for the future: It is important to consider how the JBSP mortgage will impact your long-term financial plans. For example, will you be able to afford mortgage repayments if interest rates rise? Can you afford to maintain the property if unexpected repairs are needed?

Is a JBSP mortgage right for me?

Whether a joint borrower sole proprietor (JBSP) mortgage is right for you depends on your individual circumstances and needs. A JBSP mortgage may be suitable if you are looking to purchase a property with the help of a family member or friend who wants to assist with the mortgage but does not want to be named on the title deeds. It may also be an option if you need to borrow more than you would be able to on your own but want to maintain sole ownership of the property.

However, there are also potential drawbacks to consider, such as restricted terms for elder relatives, limited availability from lenders, and the possibility of strain on the relationship with the co-borrower. It’s important to weigh the pros and cons and to speak with a mortgage broker or financial advisor who can help you determine if a JBSP mortgage is the right option for you.

How can Strive Mortgages help me with a JBSP mortgage?

There are lots of considerations when buying a home and even more so when involving a friend or family member. It can be of real comfort to have an experienced mortgage broker to help you understand the options available to you and help you decide if a JBSP mortgage is possible and right for you.

A mortgage broker can help you with a JBSP mortgage in several ways:

• Assessing your eligibility: A broker can help you determine whether a JBSP mortgage is the right option for you based on your financial circumstances and goals.
• Finding the right lender: A broker can search the market and find the right lender that offers JBSP mortgages that fit your specific needs.
• Maximising your chances of approval: A broker can help you improve your chances of approval by presenting your application in the best light possible, highlighting the strengths of your case and addressing any weaknesses.
• Explaining the process: A broker can guide you through the entire mortgage process, from application to completion, and ensure that you understand all the terms and conditions of your mortgage.
• Providing ongoing support: A broker can provide ongoing support and advice throughout the term of your mortgage, ensuring that you stay on track and achieve your financial goals.

For more information on joint borrower sole proprietor mortgages, please contact a member of the Strive team, by emailing info@strivemortgages.co.uk or call us on 01273002697.