Joint Borrower Sole Proprietor (JBSP) is the humble, unassuming instrument in the toolkit of a mortgage broker. A JBSP mortgage can be used to give young people a leg-up onto the property ladder and it can save those eligible thousands! JBSP is exactly what the name suggests – all parties are on the mortgage deed however not all parties (usually just one person) are on the title deeds. In simpler terms, this means everyone is liable for the mortgage however not everyone has legal ownership of the property.
We have already had the pleasure of using this scheme to help one of our clients and we have discussed the option with many others. The principle is similar to the traditional guarantor mortgages however there is no guarantee involved. With a JBSP mortgage, all borrowers are jointly and severally liable for the mortgage. JBSP mortgage products are no more expensive either, they are simply those from a banks standard offering.
So, how can this be used to benefit you?
For young people looking to get on the property ladder, they’re faced with several issues. Needing a 10% deposit can be a massive challenge and this is what gets the most media and government attention. Schemes such as the Help to Buy Equity Loan come in here and there is a speculation regarding government backed 5% deposit mortgages ahead of the Chancellor’s Budget this coming week. However, what gets less attention is how young people can meet the banks affordability requirements to get approved for the mortgage. This is especially a challenge for single people relying on their income alone and therefore generally a lower income than a couple. This is where JBSP can help. JBSP puts another person’s name, typically must be family, on the mortgage and therefore allows their income to be used in the affordability assessment as well. This can allow people to get the mortgage required to purchase the property. You may think the solution to this is people going for a smaller, cheaper property but depending on location, this may not be possible. Also, if we’re trying to turn ‘generation rent’ into ‘generation buy’, we have got to make buying more attractive and more accessible through options like this!
While JBSP can be great, there are of course things to be considered. Lenders will typically only lend up to age 70 without seeing proof of income into retirement. If parents are thinking of going on the mortgage with the children, this may mean a shorter mortgage term is required and if so, monthly payments will be higher. Also, any existing mortgages or credit commitments for the parent will be considered in the affordability assessment and the new mortgage will become an additional commitment for them too – all things to be aware of!
With JBSP, one person is still a first time buyer and currently first time buyers do not pay stamp duty on residential purchases below a specific threshold. As only one person is required to be on the title deeds, and it is the individual on the title deeds that determines the stamp duty tax liability, you can see how this can truly save thousands…
The above can also be a brilliant tool for unmarried couples where one person in the couple is a homeowner and the other is not. Married couples however cannot benefit even if one spouse would technically still be a first time buyer. If you did proceed with a Joint Borrower Sole Proprietor mortgage, the mortgage lender would require the individual not going on the title deeds to have a short conversation with a solicitor to ensure they were aware they would have no legal ownership of the new property.