For many first-time buyers and home movers, affordability can be one of the biggest challenges when it comes to securing a mortgage. If your solo income is low, lenders are unlikely to lend you enough to purchase a property.
Fortunately, Joint Borrower Sole Proprietor (JBSP) Mortgages may offer a solution to this issue.
In this article, we will break down what a JBSP mortgage is, how it works, to whom it may be suited, and the benefits and considerations you should be aware of before making a decision.
What is a JBSP mortgage?
A JBSP mortgage is a type of mortgage whereby multiple people are named on the mortgage agreement, but not all of those people are listed on the title deeds to the property.
Up to four people can be named on the mortgage agreement. These people are responsible for the mortgage repayments, but only the sole proprietor(s), owns the property.
Commonly, JBSP mortgage are used to help someone, often a first-time buyer, secure a mortgage with the financial support of a parent, guardian or close family member.
How does a JBSP mortgage work?
When assessing affordability for a JBSP mortgage, lenders consider the income from both the main borrower and any supporting applicants. This is likely to increase the amounts that can be borrowed, making it easier to purchase a property which may otherwise have been priced out of reach.
It is important to note that supporting borrowers do not have any ownership rights to the property. The are simply agreeing to take joint responsibility for the repayment of the mortgage, reducing the risk to the lender and increasing borrowing potential.
As such, JBSP mortgages are especially attractive for buyers with a limited income but who expect their earnings to increase over time.
Who might JBSP mortgages be ideal for?
JBSP mortgages can be particularly beneficial for those in the following circumstances:
- First-time buyers who need help meeting affordability criteria.
- Young professionals with further earnings potential but a lower starting salary
- Buyers with irregular income, such as freelancers or self-employed people
JBSP mortgage are also an option for parents or family members looking to help their children to buy a home without becoming legal co-owners.
What are the benefits of a JBSP mortgage
There are several key advantages which make JBSP mortgage an attractive proposition:
Increased borrowing power
By combining incomes, the potential borrowing amount is likely to be increased.
No impact on homeownership
Only the main applicant(s) is(are) named on the title deed, with the supporting applicants’ borrowing only being named on the mortgage agreement.
No second home stamp duty
As the supporting applicants are not added to the title deeds, additional stamp duty does not apply.
Flexibility
Additional borrowers are able to step away from the mortgage once the main applicant(s) is(are) able to afford the repayments alone. This is, however, subject to lender approval.
Key considerations of a JBSP mortgage.
While JBSP mortgage have several benefits, and can be a powerful tool in the right circumstances, there are some important considerations to be made before making your decision:
Joint responsibility and credit impact
One of the most important key drawbacks to a JBSP mortgage is that all named applicants are equally responsible for ensuring that payments are made, even if only the sole proprietor lives on the property. As a result, any missed payments will have a negative impact on the credit score of all named applicants, regardless of whether they reside at the property.
Impact on non-proprietors’ affordability
All non-proprietors are directly tied to the JBSP mortgage, meaning that their affordability could be impacted should they look to take out a mortgage to purchase their own property for the duration of the JBSP mortgage. Essentially, they’d be looking to take out a second mortgage.
Exit strategy
The removal of any non-proprietors from the JBSP mortgage may require a remortgage or a full affordability reassessment. It is important to ensure an exit strategy is in place to ensure that the borrowing remains secure.
Legal advice
It is essential that all parties involved in a JBSP mortgage seek independent legal advice to ensure that they fully understand their rights and responsibilities within the agreement.
Non-proprietor = Non-occupier
It is very common that the individual(s) named on the mortgage, but not on the deeds, are unable to reside in the mortgaged property. If the plan is for all to live together, a standard joint mortgage may be more suitable.
Is a JBSP Mortgage right for you?
A JBSP mortgage can be a powerful and effective way to access the property ladder, particularly for first-time buyers who are not yet in a strong enough financial position to purchase alone but have the support of family. They allow for homeownership without the need to gift money or enter into a co-ownership agreement.
However, JBSP mortgages are a specialised product with both great benefits and potential drawbacks, and it is important to seek professional advice from a qualified mortgage adviser who will be able to help you understand the full range of options available to you.
How can Cooper Associates Mortgages Help?
We specialise in helping our clients find the right mortgage for their unique circumstances. Our professional advisers seek to truly understand not only your situation, but also your goals, to provide tailored, holistic advice bespoke to you.
Whether you’re a first-time buyer or a parent looking for ways to support your child in their homeownership journey, we will guide you through the process from start to finish.
Reach out today to discover how Cooper Associates Mortgage can help.
