You’ve saved hard for years to get enough money to put a deposit down on your first home, however, you can’t get approved for the mortgage because your income is too low. Sound familiar?
You’re not alone.
Last year only 38.5% of Americans under 35 owned a home, compared with 69.8% of 45-54-year-olds.
Down payments and affordability are the two biggest hurdles that are preventing people from fulfilling their dream of owning a home of their own.
With so many different types of mortgages available, choosing the right one can be confusing and overwhelming, especially if you’re a first-time buyer.
If you’re struggling to get on the property ladder by yourself, a joint borrower sole proprietor mortgage could be the perfect solution. Here is our complete guide.
What is a joint borrower sole proprietor mortgage?
Often referred to as a JBSP mortgage, a joint borrower sole proprietor mortgage is basically a joint mortgage application that takes into account your parents or family member’s income to boost your affordability rate.
Many of us can’t afford a mortgage on our own, which is where a joint borrower sole proprietor mortgage can help.
If you have parents or family members that are willing to support your application, a joint borrower sole proprietor mortgage could be the answer.
So, how does it work? A JBSP mortgage allows you to borrow much more money because lenders consider all incomes who are on the application.
The important thing to note is that they won’t be a co-owner or be registered as the legal owner of the house.
The main borrower must live in the property and any joint applicants cannot live in the property.
A JBSP mortgage allows young people to own a home and get on the property ladder quicker than they would be able to independently.
Who is liable for a joint mortgage?
If your name appears on the mortgage deed, you have joint responsibility for the mortgage payments.
While joint applicants don’t have a legal claim over the property, the lender can go to anyone on the application for the repayment of any outstanding money that is owed.
How is a JBSP different from a guarantor mortgage?
Your parent or family member will contribute to the mortgage from the beginning of the agreement for a JBSP mortgage.
With a guarantor mortgage, your joint applicant will only have to make mortgage repayments if you are unable to.
What banks offer joint borrower sole proprietor mortgages?
There are several banks that offer JBSP mortgages, including:
As with any mortgage, shop around to find the best rates possible. With more than one person on the mortgage application, you will be able to access better rates than if you were a single applicant.
How much does a JBSP mortgage cost?
Joint borrower sole proprietor mortgages have the same fees applied as standard mortgages. These include:
- Booking fees: also known as application or reservation fees, this is what you pay to ‘book’ your loan.
- Arrangement fees: this is what you pay the lender to set up your mortgage.
- Valuation fees: pays for a survey to be done on the property you want to buy. It checks that the property is enough security for the loan you want to take out.
- Legal fees: pay for a solicitor to sort all the legal paperwork for you to become a homeowner.
- Other fees: some lenders charge for mortgage advice, especially if you’re using a financial advisor. Check whether CHAPS fees will apply, which cover the lender’s costs for sending mortgage funds to your solicitor.
How to get a joint mortgage approved
To apply for a JBSP mortgage you need to go through the same process as applying for a mortgage by yourself. These steps include:
- Making sure buying a home is right for your financial situation.
- Working out what you can afford with a joint application.
- Deciding what kind of property you want.
- Finding mortgage deals via advisors or brokers.
- Getting a mortgage in principle.
- Viewing properties.
- Making an offer.
- Completing your mortgage application. All joint applicants will need to sign the paperwork.
The benefits of a joint borrower sole proprietor mortgage
- Anyone can apply for a JBSP mortgage: the majority of people who apply for this type of mortgage are first time buyers, however it is also suitable for people with lower salaries that are unable to purchase a home on their own.
- JBSPs are flexible: parents can reduce their contributions over time when you’re in a position to take on the whole mortgage yourself.
- Avoid second home stamp duty: parents can avoid the additional stamp duty associated with second properties as part of a JBSP mortgage.
- JBSPs boost your credit score: if you have a low credit score, your parent’s good credit score will give yours a boost, making it much more likely that your mortgage will be approved.
- You’re not restricted on the type of property that you can buy: many other government-backed schemes will only allow you to purchase a new build property. JBSP mortgages can be used for any type of house or flat and even residential and buy-to-let applications.
- JBSPs help self-employed people get on the property ladder: if you’ve recently started a self-employed business, it can be harder to get a normal mortgage approved because the lender will often want to see at least two year’s accounts or tax returns. A JBSP will allow you to boost your affordability by adding a joint applicant’s salary.
- You won’t need to add additional security such as your parent’s home or savings with a joint borrower sole proprietor mortgage.
- Allows the buyer to be the legal owner: parents can help their children get onto the property ladder without needing to put their name on the legal title. It’s a popular type of mortgage for young people because they can achieve the dream of owning a house without having their parents’ names on the deeds.
- There is no minimum income criteria: unlike other mortgages, a JBSP doesn’t require your income to be above a certain amount. Regardless of how much you earn, your joint applicant’s income will boost the total amount that you can borrow.
Consider the lending criteria of a JBSP mortgage
Before taking out a joint borrower sole proprietor mortgage, consider the following lending criteria:
- Up to four people can take out a JBSP mortgage, although some lenders will only consider the two highest earners in the group.
- Lenders usually require the joint applicants to be family members.
- You may need to prove that you can afford the mortgage on your own after a certain period of time.
- The age of the oldest applicant will be used to decide the maximum mortgage term. Keep in mind that the shorter the mortgage term, the higher the repayments will be.
- Your application might be rejected if one of your co-applicants has a bad credit history.
- All applicants will need to seek independent legal advice to ensure they are happy with the terms and conditions.
Each lender may have different lending criteria than the ones listed above. Check what they are before applying for a JBSP.
Things to consider before taking out a JBSP mortgage
JBSPs still require the buyer to pay a deposit, which can vary depending on the deal. Parents can contribute to the deposit and then make regular contributions towards the monthly mortgage repayments.
It can be very difficult to get out of a mortgage with parents once you have signed the agreements.
The lender will need to consider whether the property owner could afford the mortgage on their own. If not, it’s unlikely they will agree to let the other party exit the agreement.
For parents or family members who are the non-owner, be aware that it can affect their credit score and impact their ability to re-mortgage on their own home.
Also consider whether you can afford your outgoings once your mortgage is approved. This will include:
- Home and contents insurance.
- Home maintenance and repairs.
- Living costs.
If you are unable to make the mortgage repayments, you may decide to sell to avoid the additional person on your mortgage to become liable for the money you owe.
Getting on the property ladder with a JBSP mortgage
Like any mortgage, a JBSP mortgage is a huge financial commitment for all parties involved. JBSP mortgages are a great way to combine resources so you can afford your own home. Now you know the ins and outs of what it involves you can make the right choice for your situation.For more personal finance advice and the latest budgeting tips, check out our blog.