Soaring house prices have made it increasingly difficult for younger people to get on the property ladder. A joint borrower sole proprietor (JBSP) mortgage is a useful option to remedy this. A JBSP mortgage allows two or more people to buy a property together with just one person taking ownership of it. It is routinely used by parents who want to help their children to get on the property ladder.
The parent (or other borrower) takes on joint responsibility for the mortgage repayment, reducing the risk for lenders, but does not have their name on the title deeds and has no legal claim to the property. Many lenders are now offering this type of mortgage but seeking joint borrower sole proprietor mortgage legal advice is always advisable first.
How is a JBSP mortgage different to a joint mortgage?
Under a joint mortgage agreement, a person borrows money to buy a home alongside someone else, be it a relative, friend or partner. Both parties have a legal claim to the property, and both are responsible for mortgage repayments.
Crucially, under a JBSP mortgage, the person taking out the mortgage with the homeowner does not have any legal claim to the property. They have joint responsibility for the mortgage repayments, but their name is not on the title deeds. This means they avoid any stamp duty surcharge too. If someone who already has a property takes on a second property, they would normally incur second home stamp duty at 3%.
What are the benefits of a JBSP mortgage?
More than a third, or 34%, of first-time buyers in England turn to family for financial help to buy their first home. A JBSP mortgage can be a great conduit for this help.
The lack of stamp duty liability for additional borrowers is a major advantage too, as the 3% surcharge could, in many cases, make helping out unfeasible.
It is possible for the additional mortgage payer to exit the agreement once the person named on the title deeds has the ability to make payments themselves. This helps first time buyers get on the property ladder earlier but once financially stable, they may remortgage on their own.
What are the disadvantages of a JBSP mortgage?
Taking out a mortgage alongside another person is a big undertaking and should not be undertaken without joint borrower sole proprietor mortgage legal advice first. It should only be done with someone you trust completely and whose financial situation you know intimately. Responsibility for mortgage repayments falls to both parties, so if the homeowner defaults, the non-owning party is still liable to repay. There is always the possibility of relations between the two parties breaking down, sparking a legal battle.
Lenders do not simply approve JBSP mortgages. They often want assurances that the homeowning party will be able to make repayments themselves in the future. They may also stipulate who can live in the property. The homeowner is usually required to live there, and the non-owning party is not permitted to.
Circumstances can change rapidly over time and those involved may want to make their own home purchases later on. It is necessary to be aware as to how these changes could impact your mortgage, so https://www.parachutelaw.co.uk/joint-borrower-sole-proprietor-mortgage-legal-advice Joint borrower sole proprietor mortgage legal advice is once again recommended.
Why choose a JBSP mortgage?
A JBSP mortgage is rarely intended as a long-term solution. It can be a useful way to help someone, particularly a child or other family member, to get on the property ladder who would otherwise struggle at that time.
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