Joint borrower sole proprietor mortgage
For first-time buyers, a joint borrower sole proprietor mortgage (JBSP) can be a great option if they have a financially stable family member. We can help you get the right advice before you apply for any of these products.
We will find you a mortgage broker that could save you both time and money. We aim to get you the best deal possible on a joint borrower sole-proprietor mortgage. And all this, completely free of charge! Take a look at our guide before you start to learn more about these arrangements, how they work and how they are used for tax purposes.
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What is a joint borrower sole proprietor mortgage?
Joint borrower and sole proprietor mortgages allow multiple people to pay their mortgage debts while one applicant owns the property. This mortgage is often used to help family members move up the property ladder. You can maximize your mortgage by combining your incomes but still retain sole ownership.
This option can be used in a variety of situations.
- To climb the ladder to property ownership
- To be used for tax purposes
- To safeguard their assets
This article explains each scenario in detail. Continue reading to learn more.
These mortgages are a great option for first-time buyers who find it difficult to get mortgage approval.
It could happen under many different circumstances, including:
- They have a low income. This could be a joint loan with three applicants. Many lenders will accept up to four applicants and consider two incomes. Some lenders will accept incomes from all four.
- They are newly self-employed but may not have enough income yet to pay a single mortgage.
- These people might not have any credit history or have a low score. A good credit score can help get a mortgage approved. However, if the principal borrower is applying for a poor credit mortgage, it is unlikely that adding another borrower will help to overcome credit problems. A specialist in bad credit lending is a better option. Also, obtaining a joint mortgage for one borrower with bad credit may be possible.
Many first-time buyers find it difficult to save a large deposit due to the rising cost of living and the additional expense of driving to work.
Banks and high-street lenders have become very cautious when reviewing mortgage applications from younger buyers with poor credit histories or no credit history.
Each lender has its criteria for mortgage approval.
It can be much easier to get approved and take the first steps on the property ladder if you have additional income.
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Support for lower-income
JBSP mortgages are often used to assist people with lower incomes. They will add their name and address to the mortgage but not the property deeds to allow their income to be used for the assessment.
Parents will usually have more income, savings, or a pension, which can make it less risky for lenders than, for example, a starting salary of £23,000 with little savings.
If you fail to make your mortgage payments, the lender will need the assurance that someone (i.e. The additional person on your mortgage will.
How to use a sole proprietor mortgage with a joint borrower
Apart from helping those financially challenged, joint borrower sole proprietor mortgages can also be used to borrow a greater amount than you can do on your own. We’ve already mentioned the benefits of the joint borrower and sole proprietor mortgages for tax and asset protection. Continue reading to learn more about each one.
To borrow more, you can use a JBSP loan
During the affordability assessments, the income of all parties involved in the agreement is disclosed. This means that you may be able to borrow more than you would as a single application.
A person buying independently would do this by depositing 10% of £30,000. A £300k property is what they want, so they will need a £270k mortgage.
Many lenders tend to limit their lending to 2.5x the borrower’s income. This would equal £180k if the applicant earned £40k a year. A few lenders might offer 5x (£200k), while in certain circumstances, they may be approved for a specialist mortgage at 6x income (£240k).
The applicant could not afford a £270k mortgage to purchase the property, even at the highest end.
If they added a second borrower to the application, who earns £30k per annum, that would result in a combined income totalling 70k per year. This means they could offer the mortgage to a joint borrower or sole proprietor basis to 4.5x income lenders.
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Use a joint borrower sole proprietor buy-to-let mortgage for tax purposes
In the past, a couple may have created a buy-to-let mortgage with the sole name of their lowest earner. This would allow them to pay less tax.
Buy-to-let mortgages have more stringent criteria than residential mortgages. Lenders require that the borrower have income.
A stay-at-home parent or someone with a lower income may not be accepted as sole applicants. Many lenders are available (although specialists still exist), and the mortgage could be denied.
Many couples and their spouses are now turning to a joint-owner, sole proprietor buy-to-let mortgage. This could allow the property to be owned by the lower earner while both contribute to the mortgage repayments.
Protect assets by using a joint borrower sole proprietor Mortgage
Many business owners want to protect their homes in the event of a failure of their venture. This could result in their home being taken or seized as payment for any debt.
JBSP mortgages allow business owners to place their home in the name of a partner, keeping it completely separate from any other assets.
Although the person who owns the business may contribute to the mortgage, to keep their home from being exposed and not to be taken into consideration when their tax bill will be calculated, they must not be named on the property deeds.
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Implications for stamp duty on a joint borrower sole proprietor mortgage
2017 saw the Chancellor of Exchequer announcement that stamp duty would be eliminated for first-time buyers purchasing homes of up to £300,000.
This could lead to significant savings of up to £5,000. It also means that money paid for stamp duty can be added as a deposit.
My partner and I would like to avoid stamp duty by taking out a JBSP loan.
The first-time buyer will be exempted from stamp duty. The spouse/partner won’t be listed on the deeds. This could allow the couple to avoid paying stamp duties, potentially saving them a lot of money.
Add stamp duty to your mortgage if you are not a first-time purchaser. This link will take you to a separate guide.
How to get the best interest rate on a joint mortgage with a sole proprietor.
Although rates for sole proprietor and joint borrower mortgages are generally the same as standard single applicant mortgages, it is more difficult to find the best deals without a broker. This is because only a few lenders offer these products.
We cannot give you a specific percentage because interest rates are constantly changing and can change. We can tell you what to do to get the best rates for your sole proprietor joint applicant mortgage.
Access to the entire market is key. This will ensure that you get the best deal possible. Our advisors are experts in the market. They will help you find the right lender for you by comparing all the products that you may be eligible for.
This approach could help you save time and money and improve your credit score. To get started, send us an enquiry today!
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What lenders offer sole proprietor and joint borrower mortgages?
There are many to choose from. They include specialist lenders, high-street banks, and building societies. These include Virgin Money and Nationwide as well as Bluestone, Bluestone, Clydesdale Bank and Post Office Money.
These mortgage lenders may place restrictions on the deals. You can find out more about…
- Norton Home loans only consider income for applicants who will be living at the address.
- The LTV cap for Dudley Building Society is 80%
- Skipton Building Society does not offer buy-to-let mortgages but JBSP mortgages for residential properties.
- Melton Building Society conducts full eligibility and affordability assessments for all applicants who are not property owners
It is important to remember that sole proprietor and joint borrower mortgage lenders are not the best options. You could miss out on great rates and special deals elsewhere if you limit yourself to one product line.
For a mortgage broker specialising in a sole proprietor, joint borrower arrangements are a better option. This will allow you to access all the deals you are eligible for and personalised advice from someone who has been arranging these mortgages every day.
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Talk to a mortgage expert about joint borrower sole proprietor mortgage repayments
A mortgage advisor can be very helpful before you apply for a sole proprietor or joint borrower mortgage. This is a big commitment for everyone involved.
Additional information and the right advice are key to any mortgage. This can help you save time, money, and marks on your credit score.
We will work with an advisor to help you find the best lender for your situation and guide you through the application process.
Send us an enquiry today and we’ll get you connected to one. This service is free with no obligation, and we don’t require any payment.
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JBSP mortgage FAQs
What happens if an additional person is on my mortgage and already owns a property?
Stamp duty is currently charged an additional 3% to those who buy their second properties.
Many people are concerned that stamp duty will be higher if the second mortgage holder already owns a property.
You don’t need the person helping you sign the property deeds. They don’t own any equity or profit on the property. They won’t have to pay the 3% surcharge on second homes because, technically, the property isn’t theirs.
These mortgages are only available to first-time buyers
Joint borrower sole proprietor mortgages don’t only work for first-time buyers. However, most of them can be offered to borrowers from this group.
A JBSP mortgage can be used for tax benefits, as well as to protect one’s assets. If you are buying a second property, such as a home or investment property, then the JBSP mortgage is a good option. You will be charged an additional 3% stamp duty if you buy a second property or a property to rent.
Many people, due to financial reasons and other factors, prefer to have their spouse’s or another family member’s name on deeds to their property.
What happens if the relationship between the homeowner & the person who is on the mortgage falls apart?
If the relationship ends, it can be difficult for the non-legal owners to remove their names from the mortgage.
It is possible that the sole proprietor mortgage owner cannot afford the mortgage due to the nature of a joint mortgage application. However, this is not always true.
This could lead to the non-legal owner facing a costly legal fight. A joint borrower or sole proprietor mortgage should not be taken lightly.
Another important reason why an exit strategy is agreed upon by all parties is why lenders will always request that all parties obtain independent legal advice before proceeding.
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Are there any changes in your future that could affect your mortgage?
Future factors should be considered as well.
- How inflation could impact your affordability.
- How mortgage rates are rising and how it could impact your mortgage repayments.
- A marriage, relationship or partnership – they might want to contribute to the mortgage and have their name listed on the deeds.
- Non-owner applicants may need to change if they want to purchase a property or get a line of credit. If affordability is a concern, they may need a JBSP mortgage to borrow what they want. They will need to prove that they can afford both mortgages.
- You can also refinance an already existing mortgage or remortgage the joint borrower. It is possible that affordability could be a problem if they have used other credit in the past.
Are you looking for an exit strategy?
This is a good idea. It is a good idea to share your plans for the future with the person applying for the mortgage.
You might want to, for example, get a mortgage in your name or change the name of the mortgage to include a spouse or partner.
A plan should be developed for an exit strategy. For most people, this would include refinancing the property in a single name as their income rises or decreases.
If you cannot make your mortgage payments, the additional person on your loan will be responsible for them. To repay your mortgage, the only solution is to sell your home and not burden the other party.
Contact for more information about how to create an exit plan. We will connect you with someone who can help you explore your options.
What term can the JBSP Mortgage be taken over?
As with most mortgages, the maximum age for a sole proprietor or joint borrower mortgage term is 80. However, some lenders do not set a maximum age limit.
It can benefit everyone involved if they all contribute towards the mortgage. This allows the loan repayments to be spread over a more affordable term.
Be aware that borrowing from older applicants can often be more expensive than those who are retired. Therefore terms may be restricted. For example, if you are 60 and want a JBSP mortgage, the lender may limit the term to five years. This could mean that the mortgage payments will be more costly.
Talking to a sole proprietor or joint owner mortgage expert is a good idea. They can provide the right advice and match your needs with the best deal.
What number of applicants will sole proprietor or joint mortgage lenders consider when considering multiple applicants?
While two individuals take out most mortgages, up to four applicants may be eligible for a joint borrower or sole proprietor mortgage. Although some lenders will only accept two incomes for a mortgage application, some lenders will accept four. This could often allow for a larger mortgage to be obtained.
Rates will vary because each lender has its criteria for assessing an application.
Is it a joint applicant or sole proprietor of a residential mortgage?
This type of mortgage can also be used to finance a student purchase-to-let loan, where the child lives in the property while at university and then rents it out when they graduate.
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