Joint Borrower Sole Proprietor Mortgages: A Smart Path to Homeownership?

In today’s challenging property market, many prospective homeowners find themselves grappling with high property prices and strict affordability assessments.

One of the solutions gaining traction is the Joint Borrower Sole Proprietor (JBSP) mortgage. But what exactly is this product, and could it be the lifeline for those struggling to get a foot on the property ladder?

Let’s take a closer look at how JBSP mortgages work, their pros and cons, who can benefit from them, and why you might consider this route.

What Is a Joint Borrower Sole Proprietor (JBSP) Mortgage?

A JBSP mortgage allows two (or more) people to apply for a mortgage together, but only one person is named on the property deeds. Essentially, while multiple borrowers are responsible for the mortgage repayments, only one becomes the legal owner of the home.

This setup can be particularly useful for first-time buyers, enabling them to borrow more by combining incomes with a family member or friend who won’t appear on the property title.

For instance, if you’re a young professional who’s yet to reach your full earning potential, your parents can help by applying as co-borrowers. This enables you to meet the affordability requirements, even though they aren’t acquiring an ownership stake in the property.

Who Can Benefit from a JBSP Mortgage?

JBSP mortgages are designed to help a variety of individuals and scenarios. Here are the key groups that stand to benefit the most from this arrangement:

1. First-Time Buyers: For those looking to get on the property ladder, rising house prices and stricter affordability rules can be major barriers. A JBSP mortgage allows first-time buyers to borrow more by combining their income with that of a family member, typically a parent, without giving up any ownership.
2. Young Professionals with Growing Careers: If you’re just starting out in your career and haven’t yet reached your full earning potential, a JBSP mortgage can help. You can benefit from a parent or family member’s income to secure a property now, with the plan to take on full responsibility in the future as your income grows.
3. Parents Helping Their Children: For parents who want to help their children without being a joint owner of the property, JBSP mortgages offer a way to support without triggering second-home Stamp Duty surcharges. This structure can be particularly appealing for those looking to assist their child without making an outright gift or sharing in property ownership.
4. Those Facing Affordability Constraints: If affordability is a challenge due to high property prices or low personal income, adding a financially stable co-borrower to the mortgage can make the difference in securing the necessary loan. JBSP is particularly useful in high-cost areas like London, where housing costs often outpace individual incomes.
5. Buyers Wanting to Avoid Second-Home Stamp Duty: If the additional borrower already owns a property, a JBSP mortgage ensures they don’t have to pay the 3% surcharge on second homes, as they will not be listed as a legal owner of the property being purchased.

How to Use a JBSP Mortgage

Using a JBSP mortgage can be relatively straightforward, but it involves careful consideration and planning. Here’s how the process works:

1. Assess Your Affordability: First, evaluate how much you can afford on your own, and how much you could borrow if you had a co-borrower.
2. Choose the Right Co-borrower: A JBSP mortgage generally involves a close family member, such as a parent, who’s willing to assist with the mortgage repayments without wanting to own a share of the property. Both parties will need to undergo credit checks and affordability assessments.
3. Find a Suitable Lender: Not all mortgage providers offer JBSP products, so working with a professional mortgage broker can help you find the best options. Some lenders also cap the co-borrowers age or limit the number of applicants who can be on the mortgage.
4. Understand the Legal Structure: You remain the sole proprietor, meaning the property is entirely in your name. This is crucial for avoiding complications related to Stamp Duty Land Tax (SDLT) surcharges, which apply to second homes.

Pros of a JBSP Mortgage

Like any mortgage product, JBSP mortgages come with their advantages, particularly for those struggling to get on the property ladder:

• Boost Your Borrowing Power: The most obvious benefit is the ability to borrow more by adding a co-borrower’s income. This can help you qualify for a mortgage you wouldn’t otherwise afford on your own.
• Avoid Additional SDLT: Since the additional borrower doesn’t appear on the property title, JBSP mortgages can help you avoid the 3% Stamp Duty surcharge, which typically applies to those purchasing second homes.
• Future Flexibility: Once your financial situation improves, you may be able to remove the co-borrower and remortgage solely in your name.
• No Ownership Conflict: Unlike traditional joint mortgages, where both parties share ownership and risk, JBSP keeps the property solely in the name of one individual. This simplifies any future sale or inheritance planning.

Cons of a JBSP Mortgage

Despite the attractive benefits, JBSP mortgages aren’t without their challenges. It’s important to weigh the potential downsides before deciding:

• Shared Financial Responsibility: While the property might be in your name, all borrowers are equally responsible for the mortgage repayments. If one person defaults, everyone on the mortgage could be liable for the missed payments, potentially impacting their credit scores.
• Limited Lender Availability: Not all mortgage lenders offer JBSP products, so your options could be more limited compared to other types of mortgages.
• Age Restrictions: Some lenders may impose age limits on the co-borrower, which could limit your options, especially if your parents are nearing retirement.
• Complex Exit Strategy: If the co-borrower wants to step back from the mortgage, you may need to remortgage or seek legal advice to resolve the issue, which could involve additional costs.

Is a JBSP Mortgage Right for You?

A Joint Borrower Sole Proprietor mortgage can be an excellent solution for first-time buyers who need extra borrowing power without handing over a share of ownership. However, like any financial product, it’s not a one-size-fits-all solution. It’s critical to consider the long-term financial commitments and have a plan for managing shared responsibility.

For those with strong support systems, such as parents willing to assist, and who are confident in their ability to take on full responsibility in the future, a JBSP mortgage can open doors to property ownership that might otherwise remain shut.

Conclusion

As housing affordability continues to challenge prospective homeowners, JBSP mortgages are a smart option worth considering for those seeking help from family or friends without complicating ownership structures. With the right advice from an experienced mortgage broker and a solid financial plan, you could be on your way to owning your dream home faster than you think.

At Coreco, we specialise in providing tailored mortgage advice, including finding the best JBSP mortgage for your unique situation. Whether you’re a first-time buyer or looking to maximise your borrowing potential, call us on 020 7220n 5110 or click here to get in touch with us today to see how we can help.

Your home may be repossessed if you do not keep up repayments on your mortgage. There may be a fee for mortgage advice. The actual amount you pay will depend on your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.