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Joint applicant, sole proprietor mortgages

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By Pete Mugleston  | Mortgage Advisor Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 10th December 2019 *

The property market can be a daunting place for a first-time buyer. With slow wage growth and the soaring cost of living, getting a foot onto the property ladder can feel like an uphill task. That’s why many are choosing the route of a joint borrower, sole proprietor (JBSP) mortgage.

The reason being? It allows a second party (usually a parent) to help their child buy a home by joining their mortgage without featuring on the title deeds.

While a joint borrower, sole proprietor mortgage can make life easier for first-time buyers, you’ll still need the right advice before applying. We’ll find you a broker who could save you time and money and make sure you end up with the best deal, and we’ll do this for free!

In this article we’ll outline the key information you need to know about these products, including:

We'll find the perfect JBSP mortgage expert for you - for free.

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What is a joint borrower, sole proprietor mortgage?

A joint borrower, sole proprietor mortgage allows multiple people to contribute to a mortgage while only one applicant owns the property and has their name 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 be approved for a mortgage alone. This could be under a range of different circumstances, including:

  • Their income is low. Many lenders will 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 has bad credit however, adding a joint borrower is unlikely to help just to overcome credit issues (more sensible to consider a specialist bad credit lender).

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.

Could I borrow more?

Potentially, yes. With a higher income on your mortgage application, you are able to increase the amount of money you borrow to buy a bigger house or make home improvements.

Essentially, the higher the income, the larger the loan available.

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.

Can I get a sole mortgage under joint ownership if I'm not a first-time buyer?

No, this type of mortgage isn’t exclusively for first-time buyers.

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.

Could there be an effect on stamp duty?

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.

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.

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.

Can my partner take out a joint owner, sole proprietor mortgage so we can avoid stamp duty?

Yes, this same logic could also be applied for stamp duty on a residential purchase, too.

For example, 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.

Using a joint borrower, sole proprietor 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.

How do I get the best rates on a joint borrower, sole proprietor mortgage?

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!

We'll find the perfect JBSP mortgage expert for you - for free.

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  • Network of over 200 brokers all with whole of market coverage
  • Save up to £400 per year with a mortgage expert matched to you
  • We've helped over 100,000 people get the right advice
  • Our quick & easy form only takes a couple of minutes to complete

Considerations

A JBSP mortgage, like any mortgage, is a huge financial decision, so it’s good to know exactly where you and anyone else on the mortgage stand.

That’s why it’s recommended that you speak to a whole-of-market broker before applying, so you’ll have access to all of the best deals you qualify for. Make an enquiry and we’ll introduce you to one for free!

Moreover, we’ve listed some commonly asked questions below to help you gain some information on whether this type of mortgage is right for you.

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.

For the best advice tailored to your circumstances, make an enquiry.

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 have an exit plan for your joint owner, sole proprietor mortgage?

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.

Can you afford to pay the mortgage on your own?

The most crucial thing to consider is whether you can afford to pay a joint owner, sole proprietor mortgage on your own.

If you are adding someone to the mortgage but intend to finance the payments yourself, keep in mind that the other person will be obliged to pay the mortgage if you don’t, and that they need to seriously consider all of the financial implications involved.

It can be very useful to sit down and calculate your income and future outgoings once your mortgage is approved, including:

  • Council tax
  • Other bills including gas, electricity and water
  • Home and contents insurance
  • Maintenance including boiler repairs, gutters and general wear and tear
  • Other financial commitments including debt and ongoing finance payments
  • Living costs

To save time, an expert mortgage advisor can do all the legwork for you.

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. Make an enquiry and we’ll introduce you to one for free.

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.

We'll find the perfect JBSP mortgage expert for you - for free.

Save time and money with the right mortgage advice, first time

  • Network of over 200 brokers all with whole of market coverage
  • Save up to £400 per year with a mortgage expert matched to you
  • We've helped over 100,000 people get the right advice
  • Our quick & easy form only takes a couple of minutes to complete

Speak to a joint borrower, sole proprietor mortgage expert before you apply

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.

Updated: 10th December 2019
OnlineMortgageAdvisor 2019 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of 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 info 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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