A Joint Borrower Sole Proprietor (JBSP) mortgage is where someone adds a friend or family member's income to their mortgage application, so they can increase their borrowing capability without forking out for a larger deposit.
Who is a Joint Borrower Sole Proprietor mortgage for?
A JBSP mortgage is usually used by parents and family members to support their loved ones in buying a property, but there are other reasons someone might enter into this type of agreement:
- Children who want to help their parents - for example, to stop their family home being repossessed.
- Couples in which one person can’t get a standard mortgage due to their financial history.
- People with bad credit history who can’t get a suitable mortgage deal despite being financially stable.
- First-time buyers who need extra support.
- People who want to borrow more than their circumstances allow.
How does a Joint Borrower Sole Proprietor mortgage work?
The buyer (the sole proprietor) is the only one who will own or have any legal rights to the property, but all borrowers have equal responsibility for paying for the mortgage and will need to cover the buyer if they don’t keep up with their payments. The joint borrowers won’t have any legal say in whether the house is sold, or in any decisions about the property.
You can have up to four people sharing a JBSP mortgage, which can make paying the monthly payments less daunting for each individual. Non-owners may also be able to avoid paying stamp duty or capital gains tax, although you should seek tax and legal advice to confirm.
This type of arrangement requires a lot of trust, honesty, and strong communication, and it can lead to relationship breakdowns and financial difficulties if things turn sour. It’s a good idea to seek independent legal advice as the joint borrower, so you can get clear about your rights.
Also keep in mind that any missed or late payments will affect everybody’s credit score, not just the sole proprietor’s. This can make it harder for the joint borrowers to get a loan or mortgage in the future.
Is it going to work long term?
The average mortgage takes around 25-30 years to pay off so, as the joint borrower, that is roughly the time frame you are committing to. You will need to think about how possible events down the line, such as losing your job or getting sick, might affect your mortgage payments.
The JBSP mortgage will also be factored into your financial outgoings if you, as the borrower, want to get another mortgage or loan in the future, so consider how that might affect your future borrowing ability.
Can a non-owner leave the joint borrower sole proprietor mortgage early?
Yes, but it usually requires a deed of release if a non-owner wants to leave the mortgage before it’s been paid off.
Want to discuss your Joint Borrower Sole Proprietor mortgage options? Give us a call on 03454504660.
