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Joint Applicant, Sole Proprietor Mortgages

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 25, 2021

A joint borrower, sole proprietor (JBSP) mortgage can make life easier for first-time buyers who have a family member willing to support them financially. But you’ll still need the right advice before applying for one of these products, and this is where we come in!

We’ll find you a mortgage broker who could save you time and money and make sure you end up with the best deal on a joint borrower sole proprietor mortgage, and we’ll do this for free! Before you get started, though, have a read through our guide to find out how these arrangements work, how they can be used for tax purposes and why it’s a good idea to seek professional advice before you get started.

What is a joint borrower, sole proprietor mortgage?

A joint borrower, sole proprietor mortgage allows multiple people to make payments on mortgage debt while a lone applicant owns the property and is named on the deeds. Usually aimed towards helping family members get a foot on the property ladder or move house, you can maximise your mortgage by combining incomes but keep sole ownership of your property.

There are a few different scenarios which make good use of this option:

  • To get onto the property ladder
  • For tax purposes
  • To protect their assets

This article explores each of these scenarios in depth, so read on to find out more.

These mortgages can be a much-needed solution for a lot of first-time buyers who have found it difficult to qualify for mortgage approval alone.

This could be under a range of different circumstances, including:

  • Their income is low. It could be a joint mortgage with 3 applicants, many lenders may accept up to four applicants and consider two incomes. A few will accept the incomes of all four.
  • They are newly self-employed and may not have enough income to cover a sole mortgage yet
  • They might have no credit history at all, or a low credit score. In this instance adding someone with good credit can help get the mortgage approved. If the main borrower is applying for a bad credit mortgage however, adding a joint borrower is unlikely to help just to overcome credit issues. It would be more sensible to consider a specialist bad credit lender and keep in mind that it could be possible to get a joint mortgage when one applicant has bad credit.

For a lot of first-time buyers, saving a large deposit can be near impossible with the price of living forever increasing and the expense of already paying for rent and commuting to work too.

High-street lenders and banks have become extremely cautious and stringent when assessing a mortgage application, especially one from a younger buyer who may have either no credit history or an unfavourable one.

Of course, the criteria for mortgage approval does differ from each lender.

However, with the security of an additional income on an application, it can be a lot easier to be approved and make those first steps onto the property ladder.

Support for lower income

A JBSP mortgage is often used to help people on ‘lower’ incomes to get support from someone (usually a family member) who will add their name to the mortgage but not to the property deeds, in order for their income to be used in the assessment.

Usually, parents will have a higher income, savings or a pension which can appear as less risky to a lender in comparison to, say, a starting salary of £23,000 and little savings.

This is because if you should fail to keep up your mortgage repayments, the lender needs the security of knowing that someone else (i.e. the additional person on your mortgage) will.

How to use a joint borrower sole proprietor mortgage

Aside from helping people who would struggle without family support get onto the property ladder, joint borrower, sole proprietor mortgages can be used as a means of borrowing a higher amount than you’d be able to solo. Other uses, as we’ve touched on already, include the protection of assets and tax purposes. Read on to find out more about each of these uses…

Using a JBSP mortgage to borrow more

The income of everyone involved in the agreement will be declared during the affordability assessments, and this obviously means you could potentially borrow more than you’d qualify for as a solo application.

An example of this would be someone buying on their own with a 10% deposit of £30,000. They want to buy a £300k property, which would mean that they need a mortgage of £270k.

Many lenders tend to cap their lending at 4.5x the borrower’s income. If this applicant had a yearly income of £40k, that would equate to £180k. A select few lenders may offer might do 5x (£200k), and in some circumstances they may be approved with a specialist mortgage at 6x (£240k) income.

Therefore, even at the top end, the applicant couldn’t afford to borrow a £270k mortgage to buy the property.

However, if they were to add a second borrower on the application who earn £30k per year, it would give a combined income of 70k a year. This means that 4.5x income lenders could consider up to £315k, so they would be able to offer the mortgage on a joint borrower, sole proprietor basis.

Using a JBSP buy-to-let mortgage for tax purposes

In the past, couples have set up a buy-to-let mortgage in the sole name of the lowest earner, as this would mean they would pay less tax.

However, buy-to-let mortgages tend to have stricter criteria compared with residential mortgages, and lenders require the person on the mortgage to have an income.

Therefore, a stay-at-home parent or the person with less income may no longer be accepted as the sole applicant and with many lenders (although there are specialists still available) the mortgage could be rejected.

That’s why many couples and spouses now turn to a joint owner, sole proprietor buy-to-let mortgage as it could allow the ownership of the property to remain in the lower earner’s name, yet have both parties contribute towards the mortgage repayments.

Using a JBSP mortgage for protecting assets

Many people who own a business or other venture may wish to protect their home in the event that their business fails, as this could lead to their home being seized or taken as payment for any debt.

A JBSP mortgage allows business owners to put their home in a partner’s name, therefore keeping the property completely separated from all other assets that could be taken.

The person with the business may contribute towards the mortgage however in order for their home to not be exposed and to not be taken into account when their tax bill is calculated, their name must remain off of the property deeds.

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Stamp duty implications

If you are a first-time buyer on a joint mortgage, sole proprietor deal and have never owned a freehold or have a leasehold interest in a residential property in the UK or abroad, then no.

In 2017, the Chancellor of the Exchequer announced that stamp duty would be abolished for first-time buyers who are buying a home of up to £300,000.

This could potentially mean hefty savings of up to £5,000, meaning that money put by for stamp duty can be added to a deposit.

Can my partner take out a JBSP mortgage so we can avoid stamp duty?

Yes. If one person in the couple already owns a home but the other is a first-time buyer, the first-time buyer’s name can be put down on the property deeds instead.

As the first-time buyer would be exempt from stamp duty and the partner/spouse wouldn’t be on the deeds of the property, the couple could avoid paying stamp duty, potentially saving a lot of money.

If you’re not a first-time buyer, there are rare scenarios where it might be possible to add stamp duty to your mortgage. We have a standalone guide on this topic which you can find through the link.

How to get the best interest rate

The rates are generally no different for joint borrower, sole proprietor mortgages compared to standard sole applicant mortgages, but the most favourable deals are more difficult to come by without a broker, as only a limited number of lenders offer these products.

Interest rates are always in flux and can change at any time, so it would be pointless for us to quote any specific percentages at you. What we can do is tell you how to get the best rates on your joint applicant sole proprietor mortgage.

The key here is having access to the entire market. That way, you can be absolutely certain that the best deal you qualify for is available to you. The advisors we work with are whole of market and will compare all of the products you qualify for and introduce you to the right lender first time.

This is an approach that could save you time, money and potential marks on your credit report, so what are you waiting for? Make an enquiry today to get the ball rolling!

Which lenders offer joint borrower, sole proprietor mortgages?

There are a good few to choose from, and they are a mixture of high street banks, building societies and specialist lenders. They include Virgin Money, Nationwide, Bluestone, Clydesdale Bank, and Post Office Money.

Some lenders who offer these mortgages impose restrictions on the deal. For example…

  • Norton Home loans will only consider the income of the applicant who will be living at the address for affordability
  • Dudley Building Society cap the LTV at 80%
  • Skipton Building Society only offer JBSP mortgages on residential properties, not buy-to-let
  • Melton Building Society carry out full affordability and eligibility assessments of all non-proprietor applicants

The most important thing to keep in mind about joint borrower, sole proprietor mortgage lenders is that you should avoid approaching one directly. There’s an entire market out there, so limiting yourself to just one product range means risking missing out on the best rates and deals that might be on offer elsewhere.

Speaking to a mortgage broker who specialises in joint borrower, sole proprietor arrangements is a better alternatives, as this will give you access to every deal that you qualify for, as well as bespoke advice from an expert who arranges these mortgages every day.

Speak to a joint borrower, sole proprietor mortgage expert

It can be really helpful to seek advice from a mortgage advisor before applying for a joint borrower, sole proprietor mortgage as it is a huge commitment for all parties involved.

With any mortgage, additional information and the right advice can save you a lot of time, money and even marks on your credit report.

One of the advisors we work with will be able to research the best lenders based on your circumstances and can guide you through the process of applying and what to do next.

Make an enquiry and we’ll introduce you to one of them today. We don’t charge a fee for this service and there’s no obligation.

FAQs

What if the additional person on my mortgage already has a property?

Currently, stamp duty is charged at an additional rate of 3% for those buying their second property.

We have spoken to many people concerned that if the second person on their mortgage already owns a property, they will have to pay more stamp duty.

The person who’s helping you out doesn’t have to be on the property deeds. So, they don’t have rights over any equity or any profit made on the property. This means that they won’t pay the 3% stamp duty surcharge for second homes as technically, the property isn’t theirs.

Are these mortgage only for first-time buyers?

No, joint borrower sole proprietor mortgages aren’t exclusively for first-time buyers, but the majority of them are offered to borrowers in this demographic.

There are other reasons why a person would choose to opt for a JBSP mortgage including tax benefits and also to protect their assets. If the property you’re planning to buy is your second property, i.e. a second home or a buy-to-let property, then you will have to pay an extra 3% in stamp duty.

This, along with other financial reasons, is why a lot of people choose to have a spouse’s or other family member’s name on the deeds to their property, rather than their own.

What happens if the relationship between the homeowner and the person who has agreed to be on the mortgage breaks down?

It can be a fairly difficult and timely process for the non-legal owner to have their name removed from the mortgage if the relationship breaks down.

Because of the nature of a joint application, sole proprietor mortgage, it is often unlikely that the legal owner can afford the mortgage on their own, although not always the case.

This can result in the non-legal owner being faced with a costly legal battle, which is why a joint borrower, sole proprietor mortgage should never be taken out lightly.

This is also another reason why an exit plan agreed on by all parties is so important, and why most lenders will always ask that all parties seek independent legal advice before proceeding.

Will any future changes of circumstances have an effect on your mortgage?

You should also consider potential future factors including:

  • Inflation and how this could affect your affordability.
  • Increase of mortgage rates and how this could affect your mortgage repayments.
  • A relationship, or marriage⁠ – they may want to contribute to the mortgage and have their name on the deeds.
  • A change for the non-owner applicant, who may want to buy a property or take some line of credit. In these circumstances, a JBSP mortgage may get in the way of them borrowing what they want if affordability is tight (they will need to provide evidence to show that they can cover the costs of both mortgages).
  • Similarly, if they want to refinance an existing mortgage, or you both want to remortgage the joint borrower, sole proprietor mortgage. If they have taken other credit since, affordability may be an issue.

Do you need an exit plan?

This is recommended. Before you and the person who has agreed to apply for the mortgage with you commits, it can be helpful for everyone involved to know what you plan to do in the future regarding your mortgage.

For example, you may want to get the mortgage in your own name one day, or perhaps in the future change the names on the mortgage to include a partner or spouse.

You should also have an exit plan, and for most this would be refinancing the property into a sole name, as and/or when their income increases or the mortgage decreases, to make this affordable.

If you’re unable to keep up with your mortgage repayments, the additional person on your mortgage will then be liable to pay them. In this case, your only option may be to sell your property to repay your mortgage and avoid burdening the other person.

For more information on how to craft an exit plan, make an enquiry today. We’ll put you in touch with someone who will be able to run through your options for free.

What term can the JPSB mortgage be taken over?

Like most mortgages, the maximum age at the end of a joint borrower, sole proprietor mortgage term can be as high as 80, though some lenders don’t set a maximum age limit.

This can be beneficial for everyone involved if all parties are contributing towards the mortgage, as it means the loan repayments can be spread over an affordable term.

Bear in mind that when borrowing with older applicants, affordability is often restricted to retirement age, so terms can be limited. If, for instance, if you want a JBSP mortgage with someone who is 60, the lender’s policy may be to cap the term to 5 years, meaning the mortgage payments could be more expensive.

For this reason, it’s useful to speak to a joint owner, sole proprietor mortgage expert who can give you the right advice and match you with the best deal, whatever the age of borrower.

How many applicants will joint borrower, sole proprietor mortgage lenders consider?

Although mostly taken out by two people, up to four applicants can be considered for a joint borrower, sole proprietor mortgage. In fact, despite some lenders only accepting two incomes on a mortgage application, there are lenders who will accept up to four. This can often mean that a larger mortgage can be taken out.

The rates will vary as each lender uses their own criteria to assess an application.

Is a joint applicant, sole proprietor mortgage residential only?

No. Joint applicant, sole proprietor mortgages exist for both residential and buy-to-let loans. Additionally, this type of mortgage could also be used for a student buy-to-let application, with the child living in the property whilst at university and then renting it out after they graduate.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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