Joint-borrower-sole-proprietor mortgage

Sometimes referred to as a JBSP mortgage, a joint-borrower-sole-proprietor mortgage allows two or more people to buy a property together but with one person taking ownership.

This type of mortgage can be especially useful for parents or family members who want to help someone else buy a home without taking ownership of the property. 

A JBSP mortgage is an alternative to guarantor mortgages. With a JBSP mortgage, parents or family members are not required to provide savings or guarantees for a deposit. And unlike a guarantor mortgage, the income of everyone on the mortgage is considered. 

The good news is that more lenders are offering joint-borrower-sole-proprietor mortgages to people who want to combine forces to buy, and the deals come with rates as competitive as standard mortgages. 

What is a joint-borrower-sole-proprietor mortgage?

A joint-borrower-sole-proprietor mortgage allows up to four people to buy a home together but with just one person owning the home. 

JBSP mortgages are often used by parents who want to help their children get on the property ladder but may also be used by siblings or even friends who want to use their combined income to buy a home that just one of them will live in. 

All borrowers have joint responsibility for the mortgage payments, which lowers the risk for lenders. 

On the other hand, this joint liability also means that if one of you cannot make the repayments, the others are liable to cover the whole amount between them. Therefore, you should only take out a JBSP mortgage with someone you trust and whose financial affairs you understand.

The mortgage holders are not named on the title deeds and have no legal claim over the property or any increase in its value. 

This type of mortgage means people can help someone they care about to buy a home or get a bigger or better property.

When the initial deal period ends and early repayment charges no longer apply, the sole owner can switch to a mortgage in their name only.

How does a joint-borrower-sole-proprietor mortgage work?

In some ways, a joint-borrower-sole-proprietor mortgage is similar to a standard mortgage. 

All borrowers are scrutinised by the lenders, with expenses and income taken into account to measure affordability.

Borrowers must meet the lender’s criteria, including age limits, income and creditworthiness. Some mortgage providers have a joint-borrower-sole-proprietor mortgage age limit whereby applicants must be no older than 70 at the end of term. Other lenders may set the age limit at 80 years of age. 

Because all the mortgage holders are liable for repayments, missing payments could affect all of their credit profiles. 

The crucial difference with a JBSP mortgage is that only one of the borrowers – the proprietor – is named on the property’s ownership deeds. Lenders often insist that this person lives at the property. 

This type of mortgage means that parents or other loved ones who don’t want a long-term interest in the property can easily exit the arrangement when the proprietor can afford a mortgage on their own.

The mortgage can also have benefits for Stamp Duty. Ordinarily, if you were buying a property with someone who has a home already, the purchase would attract second home Stamp Duty at a rate of 3%. However, with a JBSP mortgage, the other parties avoid triggering this liability. 

As with any mortgage, it’s worth considering how you would make payments if you became ill and couldn’t work or if you lost your job. In these circumstances, income protection insurance is one way of covering bills, including mortgage repayments. 

What’s the difference between a JBSP mortgage and a joint mortgage?

The key difference that separates a JBSP mortgage from a joint mortgage is that not all the borrowers are property owners. When you are the property owner, your name is listed on the title deeds. You are also liable for paying Stamp Duty.

If you are just a borrower, you have no claim to the property, but you will have responsibility for the loan debt. By way of comparison, a joint mortgage is for people who wish to buy a home and own it together. 

JBSP mortgages are often used to help close family members buy a home, but there are other options:

• Guarantor mortgage: a guarantor, typically a parent, offers savings or their own home as collateral in place of a deposit. This means the person applying for the mortgage can do so with little or no savings 

• Tenants-in-common mortgage: borrowers each buy a share of a property, which they can sell independently of the other tenant owners. 

• Shared ownership: borrowers use a mortgage to buy a share of a home and pay rent on the rest. This is a scheme run by developers

• Rent to Buy: tenants pay subsidised rent on a new-build home while saving a deposit that will allow them to buy the property or a share of it. This Is a government scheme

What else do you need to consider before taking out a JBSP mortgage?

There are a number of steps you should take before applying for a joint-borrower-sole-proprietor mortgage. 

1. Take legal advice

Taking on a mortgage debt without any rights to the property should not be taken lightly. It’s a good idea for all parties to take legal advice – some lenders will insist on this before offering a deal. 

2. Plan for the future

The borrowers should agree on how and when non-proprietors will exit the mortgage and what will happen if one party can’t keep up with payments.

3. Take out insurance

Mortgage payment protection or income protection insurance can ensure that repayments are made if, for example, one person loses their job and can’t pay their bills. 

4. Plan how to switch mortgages in the future

It’s a good idea to plan how you will move mortgage debt at the end of each term. This could lower the monthly repayments if a better rate is found or if the property increases in value and qualifies for a lower loan-to-value ratio. 

5. Consider other types of mortgages

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 for your circumstances. Take the time to research all the options.

Which lenders offer joint-borrower-sole-proprietor mortgages?

Joint-borrower-sole-proprietor mortgages are a niche market and not all lenders offer these arrangements, but there are a couple of recognisable firms among the names of JBSP mortgage lenders.

Which banks offer joint-borrower-sole-proprietor mortgages?

• Barclays Bank

• Bath Building Society

• Furness Building Society

• Hinckley & Rugby Building Society

• Metro Bank

• Newcastle Building Society

• Principality Building Society  

• Skipton Building Society 

• Tipton & Coseley Building Society  

If lack of income is the main obstacle for a mainstream residential mortgage and you have close family members who would like to help, you could benefit from a joint-borrower-sole-proprietor mortgage. But if there are other issues, such as a poor credit history, you may struggle to qualify for a JBSP mortgage.