This recent study showed that the cost of homeownership in England and Wales has risen by 20% in the last decade. It’s just not that easy to get onto the property ladder without a bit of a leg up – and a Joint Borrower Sole Proprietor Mortgage can be just that.
Here’s how it works.
(We’ll call it a JBSP mortgage from here onwards!)
How do Joint Borrower Sole Proprietor mortgages work?
A JBSP mortgage means:
- Close friends or family members can help you pay your mortgage. (You are all joint borrowers.)
- You will be the only legal owner. (You are the sole proprietor)
In most cases, up to four people can be on a JBSP mortgage. All of you are legally responsible for getting the mortgage paid.
JBSP mortgages are:
- Liberating: By increasing the pool of your household income, more options become available to you than before.
- Flexible: As your income grows, you can decrease the amount your friends or relatives pay.
- Empowering: You can become a first-time homeowner while you build your career.
Who can get one?
You should be eligible for a JBSP mortgage if you have:
- Stable income
- Good credit
- Time on your side. Many lenders have an upper age limit for the oldest borrower taking out a new JBSP mortgage. This is generally around 75 to 80 years old, which means they’d need to be about 50 to 55 when taking out a 25-year mortgage term.
- Joint borrowers who don’t have a lot of other debts. If they’re paying off a big mortgage themselves, some lenders may be reluctant.
How much can you borrow?
This will depend on the lender, but as a ballpark:
- Add the income of the borrowers together
- Multiply that number by 4.5
- Get the amount you should be able to borrow
Let’s have a look at it in real terms:
- You earn £30,000 a year.
- Multiply it by 4.5 to see what mortgage you’re likely to get
- That leaves you with about £135,000 that you may be able to borrow. Tricky. Because the average house price in the UK is currently £275,000.
Not to worry. Your mum steps in.
- She earns £50,000 a year.
- Together, you earn £80,000.
- Now multiply that by 4.5, and you have £360,000. Bingo. Things just got a lot easier.
Who owns the property?
You do. Here's the difference between:
- A JBSP mortgage and a joint mortgage. A joint mortgage is when you buy a property with someone else. You both own the property, and you’re both responsible for the mortgage. If one person can’t pay, the other one has to cover them. With a JBSP mortgage, you own the property, even though someone else is helping you pay back the amount you owe.
- A JBSP mortgage and a guarantor mortgage. A guarantor mortgage means that someone else—usually a close relative—backs you up if you can’t make payments. They will only step in to help if you’re struggling. On the other hand, with a JBSP mortgage, they will help you cover the costs from the get-go.
What are the pros and cons of JBSP mortgages?
Pros of JBSP mortgages
JBSP allows you to:
- Get on the property ladder. With increased income comes increased affordability. With a boost from your friends or family members, you have more money in the pot.
This means you may be able to:
- Buy a larger place than you can afford on your own
- Buy in an area that is outside of your price range
- Get a cheaper mortgage deal. A huge factor in paying back your mortgage is interest rates. Interest rates are calculated based on your mortgage’s balance. If you’re able to pay back your loan quicker, your interest rates may go down – and so will your repayments.
- Avoid the stamp duty that applies to a second home. (More on this below.)
Cons of JBSP mortgages
And here are some downsides:
- Credit checks matter for both you and those helping with your mortgage. For example, getting a JBSP may be tricky if your parents have other debts.
- The person who helps you out may not be able to live in the home with you. But there are some lenders that will be flexible on this.
- It’s less appealing for your backer. If someone agrees to come on board to help you pay your mortgage, that’s great for you—but maybe not as great for them. They will be liable for repaying the mortgage, but they won’t have legal ownership of the property.
- It could be a credit risk. If anyone defaults on their payment, the other borrowers are responsible. And if a plan is not in place to make the payments, everyone’s credit score could suffer.
- Age matters. Because you have to complete the mortgage term, there are some age limits in place with most lenders. The oldest borrower in the arrangement usually has to be younger than 80 years old by the time the mortgage term is completed.
What are the stamp duty implications of a JBSP mortgage?
The short answer? Promising for the people who help you out with your mortgage.
Here’s the story: If you buy a home in England or Wales over a certain threshold (currently £125,000), you must pay Stamp Duty Land Tax (SDLT). This tax starts at 2% of the property value and goes up from there, depending on how much your property is worth.
In certain situations, you don’t have to pay all (or any) of this tax:
- If you buy your home for less than the threshold amount, you don’t have to pay stamp duty.
- If you are a first-time buyer, you will either get a discount on this tax or pay no tax at all.
Additional residential properties, such as buy-to-let properties and second homes, require you to pay higher rates of stamp duty. For second homes, you will usually have to pay the normal stamp duty PLUS an additional 3%.
If the joint borrower is not listed as an owner—as with a JBSP mortgage—they will not be liable for the higher rate of stamp duty, even if they already own another property.
In practice? Say your parents come on board your JBSP mortgage, and they already own their own home; your home will not be considered their second home. That’s because they are not technically owners—only joint borrowers.
Can you get a sole mortgage with joint ownership?
A sole mortgage with joint ownership is not as easy to come by. That’s because lenders are not too keen on having owners involved who are not liable for the mortgage payments.
If you’re married or in a common-law partnership and are looking to buy property together, you may opt for :
- Single ownership. The home will be in one partner’s name and they’ll be responsible for the mortgage payments.
- Joint ownership. The home will be in both partners’ names, and they’ll both be responsible for the mortgage payments.
- Tenants-in-common. One partner owns more of the home than the other (e.g. in a 70/30 split.)
Everyone’s situation is different and figuring out what will work for your unique set of circumstances can be overwhelming. Our job is to help you do that. Have a play with our online mortgage calculator or speak to a mortgage broker now.
Alex decided to become a mortgage broker after he used one to buy his flat. Was he inspired by the amazing service? No. He just figured he could do a much better job. Today, Alex leads one of Habito's biggest teams of brokers, giving people the expert, savvy advice they need to make buying their homes a breeze.