
What is a joint borrower sole proprietor mortgage?
A JBSP mortgage could be your ticket onto the property ladder. Read on to find out more.
A JBSP mortgage could be your ticket onto the property ladder. Read on to find out more.
Find an adviserWhat is a joint borrower sole proprietor mortgage?
Joint borrower sole proprietor (JBSP) mortgages are innovative mortgage arrangements for people who want help buying their home. You can combine your financial resources with up to three other people to increase your borrowing capacity, but there are some important things to consider before you apply.
What is a joint borrower sole proprietor mortgage?
A joint borrower sole proprietor (JBSP) mortgage allows multiple people to buy a property together with only one person taking ownership.
It’s an arrangement, rather than an actual product, which allows up to four people to jointly take out a mortgage and combine their incomes to make repayments. All borrowers are responsible for repaying the mortgage but only one is the legal owner of the property. That person – the sole proprietor – is the only individual named on the deed and the only one with control and ownership rights.
JBSP mortgages are an increasingly popular option for first-time buyers and families looking to help younger relatives get onto the property ladder. Combining incomes and credit ratings could help unlock better deals because JBSP mortgages reduce the risk to the lender.
How does a JBSP mortgage work?
A JBSP mortgage works like a standard mortgage except that a lender assesses multiple borrowers rather than just one.
Lenders assess everyone’s affordability, and all borrowers need to meet criteria around age, income and creditworthiness. Age limits for JBSP mortgages vary by lender, with some allowing borrowers to be up to 85 years old.
Everyone is liable for repayments, so missed payments could impact everyone’s credit ratings, but only the legal owner is named on the deed. If you’re the owner, lenders usually insist that you live in the property.
Unlike a guarantor mortgage, additional borrowers aren’t necessarily locked into the arrangement for the whole mortgage term with a JBSP mortgage. They can ask the lender to exit the mortgage once you can afford it by yourself.
What are the benefits of a JBSP mortgage?
It’s worth considering a JBSP mortgage if you want support at the start of your homebuying journey. You can combine financial resources with up to three other people to increase your borrowing capacity, which is especially helpful if someone has a higher income or better credit score.
Once you have a larger income, you might be able to take over the mortgage yourself. Additional borrowers can ask to exit the arrangement after the initial deal period, making it a good option if there are people who want to help you get onto the property ladder but forgo any interest in your property.
JBSP are comparatively low risk for many lenders, meaning they may be able to offer you a better deal. You might be able to get a lower interest rate or a better loan-to-value (LTV) ratio, or they might accept a smaller deposit.
What are the disadvantages of a JBSP mortgage?
But JBSP mortgages come with some risks. All borrowers are responsible for repayments but only the sole proprietor of the property has legal ownership, so additional borrowers are exposed to legal and financial risks without any of the benefits.
Exiting a JBSP mortgage can be complicated if your relationship with the other people in the arrangement changes or someone wants to sell their share. The tax implications can also be complex depending on the circumstances of the other borrowers.
What’s the difference between a JBSP mortgage and a joint mortgage?
A JBSP mortgage involves multiple borrowers taking out a mortgage but only one person owning the property. It’s designed to enable a single owner to qualify for a mortgage with help from other people.
In contrast, a joint mortgage is for two or more people who want to own a home together. Each borrower’s name appears on the deed, and they all have equal rights and responsibilities.
What’s the difference between a JBSP mortgage and a guarantor mortgage?
Both JBSP and guarantor mortgages are designed to help one person buy a house with support from other people, but they do so in different ways.
A guarantor mortgage involves a guarantor, typically a parent, using either their savings or property as security in place of a deposit. This helps you secure a mortgage with little or no deposit, and your guarantor only becomes responsible for repayments if the borrower misses them. Your guarantor is normally tied in for the entire mortgage term.
A JBSP mortgage involves multiple people taking out a mortgage, so everyone is equally responsible for repayments. Everyone is considered a borrower and everyone uses their income to pay back the loan, but only one person owns the property. Additional borrowers might be able to exit the mortgage once you can afford it yourself.
Things to think about before you take out a JBSP mortgage
It's important that everyone involved in a JBSP mortgage arrangement understands their rights and responsibilities. Taking on mortgage debt without any rights to the property is a big risk, so it’s a good idea for everyone to seek legal advice. Some lenders may insist on this before offering you a deal.
It’s a good idea to think about the future too. You can agree an exit strategy for the other borrowers and come up with a contingency plan in case one of you can’t keep up with the repayments.
A JBSP mortgage, much like a guarantor mortgage, creates a financial link between you and your supporters. If things go wrong, it could put significant strain on your relationship with them, so it’s important to be confident in the long-term strength of your connection.
Pool your resources to get on the property ladder
A JBSP mortgage could help you increase your borrowing capacity with support from your loved ones. By taking out a mortgage together, you'll present less risk to a lender which could mean lower rates and better terms. You can get started on your homebuying journey and take over your mortgage when you’re ready.
Applying for a mortgage can be a complicated process and tailored support can help you understand if a JBSP mortgage is the right solution for you.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
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