Recent research has revealed a surge in homeownership expenses in England and Wales over the past decade. This steep increase has made it increasingly more challenging to step onto the property ladder with some form of assistance. However, there is a beacon of hope in the form of Joint Borrower Sole Proprietor Mortgages (JBSP). These mortgages provide the much-needed support, offering a potential solution to the financial hurdles of homeownership. Here’s a breakdown of how JBSP mortgages operate.

How do JBSP mortgages function? 

A JBSP mortgage essentially entails:

• Close friends or family members can contribute towards your mortgage payments, making all of you joint borrowers.
• Despite this joint borrowing, you retain sole legal ownership of the property.

In most scenarios, up to four individuals can be part of a JBSP mortgage, with all parties sharing the legal responsibility for ensuring mortgage payments are met.

Critical aspects of JBSP mortgage

JBSP mortgages bring with them a sense of liberation. Pooling together the household income opens up more financial avenues than were previously available. This flexibility allows you to reduce the contributions from friends or relatives as your income grows, giving you a sense of empowerment and control over your financial situation. With a JBSP mortgage, you can embark on homeownership as a first-timer while advancing your career.

Who qualifies for a JBSP mortgage?

Eligibility for a JBSP mortgage typically requires the following:

• Stable income sources
• Strong credit ratings
• Adherence to age limits set by most lenders is an essential eligibility requirement for a JBSP mortgage. These age limits usually cap the oldest borrower at around 75 to 80 years old at the end of a 25-year mortgage term. This means all borrowers should be within this age range when the mortgage term ends to ensure the mortgage can be fully repaid. Joint borrowers should be free of substantial debts, which could deter lenders.

How much can you borrow with a JBSP mortgage?

The borrowing capacity varies with each lender but generally follows this formula:

• Combine the incomes of all borrowers
• Multiply that sum by 4.5 to gauge the potential borrowing amount

For instance:

Let’s assume your annual income is £32,000. Multiply it by 4.5 to estimate your likely mortgage amount. This calculation yields approximately £144,000, which might be insufficient given the current average UK house price of £282,000.

However, let’s introduce your mother, who earns £45,000 annually. Together, your combined income totals £77,000. Applying the same formula results in a potential borrowing capacity of £346,500, significantly easing your property search.

Ownership details 

With a JBSP mortgage, you maintain sole ownership of the property, distinct from:

• Joint mortgages, where co-owners share both the property and mortgage responsibilities.
• Guarantor mortgages, where a close relative guarantees repayments only if the borrower falters. In contrast, JBSP mortgages offer immediate assistance from backers.

Pros and cons of JBSP mortgages

Advantages of JBSP mortgages include:

• Facilitating entry into homeownership with expanded income resources
• Enhancing affordability for more significant or better-located properties
• Potentially securing better mortgage terms due to quicker loan repayment and reduced interest rates
• Avoiding additional stamp duty costs applicable to second homes

On the flip side, drawbacks encompass:

• Scrutiny of credit histories for all involved parties
• Limited living options for backers, although some lenders may accommodate this
• Disparity in benefits for backers who bear repayment liabilities without ownership rights
• Credit risks for all borrowers if payment defaults occur, affecting everyone’s credit scores
• Age restrictions due to mortgage term completion requirements, usually under 80 years old for the eldest borrower

Stamp duty implications

JBSP mortgages offer advantageous stamp duty scenarios for backers:

• Backers are not subject to higher stamp duty rates, as they are joint borrowers rather than owners of a second property.

Navigating property ownership options

Acquiring a sole mortgage with joint ownership complexities due to lender preferences favouring mortgage liability alignment.

For couples considering property ownership, choices typically include single ownership, joint ownership, or tenants-in-common arrangements.

For personalized guidance and to ensure you make the best decision for your circumstances, it’s always a good idea to seek advice from mortgage experts. They can assess your options and guide your decision-making, providing support and reassurance. Reach out to our experienced advisers, and we’ll give an overview of available options while delving into the best-suited solution for you. Call us on 0333 335 6595 or message us to get started!