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Joint Borrower Sole Proprietor

Steven Hargreaves answers the most commonly asked questions on Joint Borrower Sole Proprietor Mortgages (JBSP).

What is a JBSP mortgage and how do they work?

A Joint Borrower Sole Proprietor is when you’re asking somebody else to come on your mortgage with you to aid borrowing some more money. The majority of additional mortgage applicants are relatives.  They should be aware however that if they wanted to buy a house in the future, they would have to pay Stamp Duty, because they are no longer a First Time Buyer.

When the proprietors are able to support the mortgage on their own, they can then Remortgage and the additional person that was on the mortgage to increase the borrowing can be removed. A lot of people used to refer to it as a guarantor mortgage, and the Joint Borrower Sole Proprietor is very similar, with some subtle differences.

With a guarantor mortgage the family member is also responsible for the monthly mortgage payments whereas on a JBSP, they’re only liable if the proprietor can no longer make the payments.

There are a few more hoops to possibly jump through from a lender’s perspective, and not all lenders offer JBSP, even some bigger banks and building societies, so it is a little bit limited.

What criteria do you need to meet for a JBSP mortgage?

You’ve got to be a First Time Buyer, and in the majority of cases it does have to be a family member that is added onto the mortgage. There are four lenders who would accept a non-family member.

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Do you pay stamp duty on a JBSP mortgage?

A First Time Buyer wouldn’t pay Stamp Duty up to £300,000, on a traditional guarantor mortgage, if the guarantor already has their own home and mortgage, it would be classed as a second tier Stamp Duty for them, whereas with JBSP, that family member isn’t fully on the mortgage, therefore there’s no second tier stamp duty to pay.

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

Guarantor mortgages are no longer commonly used, and one of the reasons for that is because of the stamp duty situation. From a financial perspective, it does make a big difference. The JBSP, if the circumstances are there, works out very well. 

You are a little bit restricted, as the mortgage can only be run until applicants turn age seventy with some lenders, however some will extend this to seventy-five or even eighty. If you’re a twenty-five year old First Time Buyer, a thirty-five or forty year term would be typically available to you, but if your parent was on the JBSP and they are aged fifty-five or sixty, it will shorten the term of the mortgage available.

What else should I be aware of?

You can get onto that next level on the property ladder with family intervention, which has got to be a great big positive. It means not having to move in two or three years because you can purchase a more expensive property at the outset. You are tying that family member into having a mortgage with you for a certain period of time, so that’s got to be taken into account and it could prevent them from being able to move, which is not so positive. 

As a broker, we would chat through a client’s circumstances and make sure they’re aware of everything that’s involved.