Boosting Homeownership: Joint Borrower Sole Proprietor Mortgages

By Jennifer Harrison, Content Lead

JBSP mortgages are not part of MPowered Mortgages’ proposition. This blog serves for educational purposes only.?

If you’re looking to buy a property in the UK but are struggling to secure a mortgage for the amount you need, then a joint borrower sole proprietor mortgage could be the solution you require. In this article, we'll identify what this type of mortgage is, how it works, and why it may be the right choice for you.?

Currently, would-be homeowners are facing many challenges when it comes to affordability. The ongoing cost-of-living crisis means many are struggling to save a deposit, and the increase in house prices over the last few years means that brokers are having to look harder for new, practical solutions to enable homeownership for their clients. In an economic climate where receiving help from ‘The Bank of Mum and Dad’ is now a common way first-time buyers are getting onto the property ladder, joint borrower sole proprietor mortgages (JBSP) are a viable way for borrowers to increase the amount they can borrow with the help of their families.??

What is a JBSP mortgage??

A joint borrower sole proprietor mortgage is a specialist mortgage product that allows up to four borrowers to apply for a mortgage together, but with only one borrower listed as the sole proprietor. It provides a way for a friend or family member to help a buyer improve their affordability, without having to physically hand over any money.??

All the borrowers are equally responsible for repaying the mortgage, which lowers the risk for lenders, but as the application will be based on the combined income of all listed ‘borrowers’, it increases the amount that can be borrowed – a huge benefit for the would-be homeowner. This can help someone get onto the property ladder sooner or help them afford a better property than they would be able to purchase on their own.??

How does a JBSP mortgage work??

In many ways, applying for a joint borrower sole proprietor mortgage is similar to applying for a standard mortgage. When applying for a joint borrower sole proprietor mortgage, all borrowers will be assessed by the lender based on their income, credit score, and other financial factors. Provided that the borrowers all meet the lender’s criteria, the lender will then determine the maximum amount they are willing to lend based on the combined income and creditworthiness of all borrowers.??

Once the mortgage is approved, the property will be registered in the name of the sole proprietor, but all borrowers will be equally responsible for making mortgage payments. This means if one borrower is unable to make their payments, the other borrower(s) will need to cover the full amount. It's important to note that all borrowers will be equally liable for any missed payments or defaults, regardless of who is listed as the legal owner; missed payments could impact the credit scores of all borrowers.??

When the mortgage period expires, the sole owner can remortgage to a deal in their name only if they’re in a financial position to do so.??

Is a JBSP mortgage right for me??

As with most mortgage products there are pros and cons you should weigh up before applying. Increased borrowing capacity and lower risk for lenders can mean a joint borrower sole proprietor mortgage appears to be a no-brainer for potential first-time buyers. However, it does come with drawbacks including the following:?

Limited control for additional borrowers – Only the sole proprietor is listed as the legal homeowner and so the other borrowers have no control when it comes to decisions regarding the property. They also have no rights to any increase or decrease in value which can lead to conflict.?

Exiting the agreement – If one borrower wants to sell their share after the mortgage period, but doing so makes it unaffordable for the sole proprietor, this can cause complications for everyone involved. Additionally, if there is a shift in the relationships between borrowers, this can make things more complex too.??

Financial risk for additional borrowers – With no legal ownership, non-proprietor borrowers are exposed to the financial risks without any real benefits.??

Things to consider before you take out a JBSP mortgage??

Before applying for a joint borrower sole proprietor mortgage, you should consider a few things. Trust, communication, and a good understanding of the potential risks are very important when acquiring this sort of mortgage deal.??

As mentioned above, all borrowers will be equally responsible for making mortgage payments, regardless of who is listed as the sole proprietor. This means that there needs to be a high level of trust and communication between all borrowers to ensure that payments are made on time, and everyone is on the same page. If one borrower is unable to make their payments, the other borrower(s) will need to cover the full amount, and this can put a strain on relationships and may lead to financial difficulties if not managed properly.?

It's important to have a legal agreement in place between all borrowers outlining each borrower's responsibilities and stating what will happen in the event of missed payments or defaults. It is also common for all parties to consult with a finance or tax professional to understand the tax implications that the arrangement will have on each borrower.?

How to Apply for a JBSP Mortgage?

Using a mortgage broker when applying for a JBSP mortgage can really help speed up the process thanks to their industry knowledge and understanding of what different lenders might be able to offer. Whether you choose to use a broker or not, the steps you’ll need to follow include:?

Step 1: Find a Lender?

The first step is to find a lender that offers joint borrower sole proprietor mortgages. Not all lenders offer this type of mortgage, so it's important to do your research and compare different options to find the best fit for your needs. Here is where a broker would be very useful, as they’ll be able to point you in the right direction straight away, saving you time.?

Step 2: Gather Your Documents?

Though it will vary from lender to lender, you'll need to provide the same documents as you would for a traditional mortgage application, including proof of income, bank statements, and identification documents. Each borrower will need to provide their own set of documents.?

Step 3: Submit Your Application?

Once you have all your documents ready, you can submit your application to the lender. They will review your application and determine if they’re willing to lend to you and, if so, what the maximum amount they are willing to lend is.?

Step 4: Agree on Terms?

If your application is approved, you'll need to agree on the terms of the mortgage, including the interest rate, repayment period, and any other conditions set by the lender.?

Step 5: Complete the Legal Process?

Once you have agreed on the terms, you'll need to complete the legal process of purchasing the property. This will involve signing the mortgage documents and transferring ownership of the property to the sole proprietor.?

If you have carefully considered the risks and have a clear agreement with all involved parties, a joint borrower sole proprietor mortgage can make homeownership a reality where it may have not been possible before. Talking through your options with a mortgage broker is a great way to decide whether a JSBP mortgage is the right route for you.??

All information contained on this blog is for general information use only. It does not provide mortgage advice and should not be construed as being mortgage advice, which can be provided by your mortgage broker and advisor only.?

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