Hi if we haven’t met before, my name is Dan, I am a CeMAP qualified mortgage & protection adviser. This video is purely for educational purposes only, and should not be seen as advice or a recommendation to act and I must stress your home may be repossessed if you do not keep up with the repayments on the mortgage.
With that out of the way, on with the video.
A lot of us have been there, an aspiring first-time buyer thinking our dreams are out of reach but that may not be the case!
It’s no secret that property prices are increasing in most areas of the UK, making them unaffordable for many of us.
Taking out a Joint Borrower, Sole Properiter mortgage may just help you purchase the property you have your heart set on.
But what is a joint borrower sole proprietor mortgage? In the simplest terms, it’s where you take out the mortgage with your parents or another family member willing to have joint responsibility for the mortgage payments, but only you actually own the property.
It is possible to do this with someone who isn’t a family member but this isn’t as common.
Everyone who appears on the mortgage application will have to meet the lending criteria and show that they can afford the repayments to be granted a mortgage
If you’re unable to make the payments at any point the others are liable to pay the whole payment.
And one thing to note is your family members are not co-owners and are not named on the title deeds so they don’t have any legal claim over the property or any increase in value.
Getting help in this way means you might be able to afford a property when you otherwise wouldn’t or to afford a bigger or better property, as your family members’ income is taken into account along with your own.
Joint Borrower, Sole Proprietor mortgages are designed to help you with the mortgage payments temporarily until you can afford them by yourself.
When you’ve come to the end of the initial deal period you may be in a position to switch to a mortgage in your name only.
Joint Borrower, Sole Proprietor can also help you get extra finance in the future if you have no credit history or a low credit score.
Once you’ve taken out the mortgage, by making the mortgage payments each month, and showing you’re a reliable borrower, you can build your credit rating. Watch this video on other ways to improve your credit score
Buying jointly with parents is an option but there are negatives to this.
For example, you won’t benefit from the first-time buyer stamp duty exemption if you didn’t take a mortgage out on the Joint Borrower Sole Proprietor basis.
At the time of recording, this means that you won’t pay stamp duty on the first £300,000 if you’re a First Time Buyer but everyone buying the property must be a first-time buyer to qualify.
Since 2016 an extra 3% of the whole property price has also been charged on additional properties, so this would apply if your parents own their home or another property for example.
To avoid these issues, one option is to take out a joint borrower sole proprietor mortgage, also known as a JBSP mortgage.
Like with taking out any type of mortgage, it’s a good idea to speak to a qualified mortgage adviser, such as myself, who can look at the whole market to find the most suitable deal for you. They can also advise on products that are not available directly from the lender.
Joint Borrower, Sole Proprietor mortgage lending criteriaAlthough joint borrower sole proprietor mortgages are usually aimed at first-time buyers, you don’t always have to be a first-time buyer to take one out.
They may be available for remortgaging as well as new purchases and you can also change from a standard mortgage to a JBSP mortgage.
You’ll also be able to take out a mortgage with up to an additional 3 people, so a maximum of 4 including yourself.
While some lenders don’t specify what your relationship to the other people should be, most require them to be family members.
Another thing to note is: only you, the sole proprietor, can live in the property.
In some cases, you may be asked to prove that you will be able to afford the mortgage on your own after a certain period, such as 5 years.
If you’re in a profession that has a clear career progression and salary increase then you should be able to afford the mortgage but if you’re not, things might be a bit more difficult for you to move away from a Joint Borrower, Sole Proprietor mortgage.
The maximum term available to you will be assessed on the age of the oldest borrower. The majority of lenders require borrowers to have paid off their mortgage by the age of 75, although others allow up to 85 or have no age limit at all, so if you’re taking out a mortgage with your parents this may restrict the length of the term.
Something else to note is the shorter the term the higher the mortgage repayments will be. Which could then mean this is unaffordable to you.
All parties involved in the mortgage application will have to take independent legal advice to make sure they are fully aware of the implications of what they are entering into.
What to consider before taking out a Joint Borrower, Sole Proprietor mortgageOne of the main issues to consider is what would happen if your relationship with the family members on your mortgage broke down.
It can be a complicated and costly process to have their names removed from the mortgage and, as it’s unlikely that you’ll be able to afford the mortgage on your own, selling the property might be your only option.
If you’re currently paying the mortgage repayments yourself, you should also think about how you would feel if you couldn’t afford them anymore.
What if you lose your job for example, and your family members had to cover the payments. You might not feel comfortable with this continuing long term so you have to sell the property.
And as with taking out any mortgage, you need to make sure you can afford all the other costs of owning a home too, such as maintenance costs, utility bills and insurance, and consider the implications of any changes to your circumstances.
Other than losing your job, you could become unable to work because of illness or injury, I covered a video on why you should consider insurance here
Something else to consider is, what if you find yourself in a relationship and they want to contribute towards the mortgage and add themselves to the property title deeds? It’s unlikely to be possible.
If you decide that a joint borrower sole proprietor mortgage isn’t for you, I have created a video on ways to get on the housing ladder with your parent’s help here.
Speak to a qualified mortgage adviser to discuss these in greater detail.
If you’d like my help obtaining a mortgage, please contact me, my details are below.
Also, not expected or necessary but sometimes I am contacted to ask how you can thank me for producing helpful videos, if you’d like to do this, you can buy me a coffee using the link below.
Check out this video for more information on how to improve your credit score.
Remember, your home may be repossessed if you do not keep up with the repayments on the mortgage.
See you next week.