A Joint Borrower Sole Proprietor Mortgage (otherwise referred to as a JBSP mortgage) is a type of home loan that allows two (or more) people to borrow money together while only one of them is named on the property.
This can be beneficial for people who want to buy a property but don’t have enough money for a deposit or who have bad credit and need someone with good credit to co-sign the loan.
A JBSP is primarily used as a way of helping first time buyers to get onto the property ladder, and can assist in securing a mortgage and potentially increase the borrowing scope too.
JBSP mortgages allow individuals to accept the financial support of their family, while retaining a sense of independence through sole ownership of the property.
There are a few things to consider before taking out a Joint Borrower Sole Proprietor Mortgage.
Firstly, you need to make sure that both parties are happy with the agreement and understand the implications of becoming joint borrowers. You should also take into account that the mortgage will be in both of your names, which could affect your credit score if either party doesn’t keep up with repayments.
What does Joint Borrower Sole Proprietor mean?
This is a bit of a mouthful!
JOINT BORROWER
There will always be at least two people party to the mortgage. ie two or more borrowers.
These borrowers are jointly (equally) liable for the mortgage repayments. The person/s buying the property will apply with one or two joint borrowers, often these are parents.
SOLE PROPRIETOR
This is the person, or persons, who will own the property and be entered at Land Registry as the legal owners.
The extra borrowers, possibly the parents, will not be a proprietor and will not own any part of the property.
Mortgage options
You will have the normal choices for interest rates and repayment method.
Repayment methods
There are two main repayment methods available for Joint Borrower Sole Proprietor mortgages – repayment and interest-only.
With a repayment mortgage, each monthly payment is made up of both interest and capital. The amount of capital repaid each month gradually increases as the loan is paid off, meaning that the mortgage will definitely be cleared at the end of the term.
With an interest-only mortgage, monthly payments only go towards the interest on the loan. No capital is repaid, meaning that the full amount of the mortgage must be paid off at the end of the term.
Which is best for you will depend on your individual circumstances. Take a look at our guide to the different types of mortgages for more information.
What happens when my interest only mortgage ends?
How do you repay an interest only mortgage?
Mortgage term
A large percentage of first time buyers now opt for a 30 year mortgage term, as it helps to keep the monthly payments manageable, these can be called marathon mortgages.
One aspect to watch out for is the age of the guarantor plus the mortgage term you need. If this takes them over age 65 then this is classed as Borrowing into retirement and the lender will want some evidence of pension income.
Interest rates
There are two main types of interest rate: fixed and variable.
A fixed interest rate means that the rate you pay will stay the same for a set period of time, usually between two and five years. This can give you peace of mind as you know exactly how much your mortgage repayments will be during this time. After the fixed rate period ends, your interest rate will usually revert to the lender’s standard variable rate (SVR).
A variable interest rate means that the amount you pay each month can go up or down, depending on changes in the Bank of England base rate. Variable rates can increase during the term of your mortgage, which could make your repayments more expensive.
You should also think about the different mortgage fees. Some products have an arrangement fee, which is charged by the lender when you take out the mortgage.
Making the decision to take out a Joint Borrower Sole Proprietor Mortgage is a big one, so it’s important to do your research and make sure you understand all of the implications before making any decisions.
Could a fixed rate deal be the right type of mortgage for you?
JBSP financial responsibilities
With a JBSP mortgage both borrowers are legally responsible for repaying the debt. This means that if one borrower fails to make their payments, the other borrower is still liable for the full amount.
A joint mortgage is one in which you buy a home jointly with someone else – be it a relative, friend or partner – and you share both the ownership and the financial responsibilities. Therefore, both parties are responsible for repaying the mortgage, and both have a legal claim to the property ownership.
If you’re thinking of taking out a joint mortgage, it’s important to understand that this isn’t simply a case of two people sharing the same mortgage. You will be jointly and severally liable for the mortgage repayments, which means that if your co-borrower were to stop making their payments, the lender could pursue either or both of you for the full amount owed.
With a JBSP mortgage the financial commitment is the same but without any ownership of the property.
CONTACT A MORTGAGE BROKER
If you are ready to take the next step then we can put you in touch with a fully qualified independent mortgage broker.
Guarantor mortgage
This is a popular option for first-time buyers and those with poor credit histories
A guarantor mortgage is a type of joint mortgage in which one party agrees to act as a guarantor for the other (they guarantee the monthly payments). The guarantor is usually a family member or close friend who uses their own property as security against the loan. This means that if the borrower fails to make their repayments, the guarantor will be liable for the debt.
Guarantor mortgages can be a good option for people with bad credit histories or who are self-employed, as they offer a way to get on the property ladder that might not otherwise be available. However, it’s important to understand that taking out a guarantor mortgage is a big responsibility and should not be entered into lightly.
A guarantor isn’t considered a borrower, although they are assessed as such, they simply guarantee to make the monthly mortgage payments if needed.
The only way in which a guarantor mortgage is similar to a JBSP mortgage is that the parents have no legal claim to property ownership in either. With a guarantor mortgage, parents only assume responsibility for the debt if their son or daughter can no longer meet the repayments.
Conversely, with a JBSP mortgage, they agree to contribute towards the mortgage repayments from the beginning.
Family Offset Mortgage
Both a JBSP mortgage and a guarantor mortgage require the person helping to be formally part of the mortgage arrangement.
A family offset mortgage works in a different way, utilising a family members cash savings to reduce the amount borrowed. Like standard offset mortgages, the amount of savings is used to notionally reduce the mortgage debt, for the purposes of calculating mortgage interest.
Although the savings are linked to the mortgage, there’s no liability for the mortgage payments, or final repayment of debt.
It’s a simpler way of parents helping their children to purchase a property, without giving away their savings.
You will find more useful information in our article: What is a family offset mortgage?
Family deposit mortgage
This is very similar to the family offset mortgage.
It also utilises cash savings from a family member. But instead of being used to ‘offset’ the mortgage interest, the savings are kept in their own savings account, often earning interest.
This takes the place of a cash deposit.
It won’t reduce the monthly cost of a mortgage but does allow you to borrow money without having a deposit of your own.
Read more: What is a family deposit mortgage?
Mortgage for students
There are special schemes aimed at university students.
They allow them to purchase a property to live in, rather than renting during their studies. This can be as a straightforward residential mortgage or a buy to let mortgage, known as a “buy for uni mortgage”.
Now it’s hugely unlikely that a student will have enough cash, or income, to qualify for a mortgage by themselves.
So how is this done?
The lenders do this by incorporating either a guarantor, or a JBSP arrangement.
It’s even possible to obtain a 100% mortgage by gaining some additional security or utilising a family deposit.
You will find more useful information in our guide: Mortgages for students
Combined income
Typically, a JBSP mortgage lender will consider up to four applicants for a single JBSP mortgage, although this figure can differ between providers. Usually, only two incomes will be formally considered, with any others only being taken into account as additional financial guarantees.
The amount that can be borrowed will vary between applications as well as differing lender criteria.
Typically, a JBSP mortgage will allow up to four applicants and most lenders will cap your potential borrowings to 4.5 times the combined income, although some lenders may offer more.
The ‘reverse’ JBSP mortgage explained
A conventional Joint Borrower Sole Proprietor mortgage typically involves the parents financially supporting their children.
But there are many cases where a parent has ended up with a mortgage later in life, and they no longer have the income to support the repayments. This could be due to a life event of their own, perhaps a separation or a death.
Using a reverse JBSP mortgage, their adult children can provide financial support by joining them on the mortgage.
This can avoid the need to sell the family home and downsize.
The children boost the mortgage affordability, without the requirement to live in the property or have any ownership of it.
Financial problems
However, there are some risks associated with a JBSP mortgage as well.
If the main person who is named on the mortgage defaults on the loan, the other person is still responsible for keeping up with the monthly repayments. This can lead to financial problems for both parties involved.
It’s important to make sure that you trust the person you are taking out the mortgage with and that you are both in a good financial position before signing any paperwork.
A JBSP mortgage is one way of helping family members buy a home, but a guarantor mortgage or a housing scheme could be more appropriate, so it’s important to understand all the options.
Expert advice
A Joint Borrower Sole Proprietor Mortgage can be a great way for a parent or close friend to help with the mortgage side of buying a home, but it’s important to understand the risks and responsibilities involved before signing any paperwork.
Our team of mortgage experts are here to help you make the best decision for your needs and provide expert advice every step of the way. So if you have any questions about joint mortgages or any other type of home loan, don’t hesitate to get in touch.
