A Loan at Last
If you are having trouble getting the mortgage you need to move up the property ladder, but you know you can afford it, there may be another solution – the Joint Borrower Sole Proprietor Mortgage.
In recent years, further regulation of the mortgage market has led to stricter underwriting practices around key areas such as affordability and sustainability. Although you might not agree right now, this is actually a good thing.
However, you might be scratching your head as to why you can’t get a mortgage that you know you can comfortably afford (a common example of this is for self-employed people looking for a mortgage). This could mean that you either have to wait for a change of circumstances or buy a property for a lower amount that might not be exactly what you want.
Alternatively, you can look at the other routes and the Joint Borrower Sole Proprietor Mortgage (JBSP) could be a solution.
So how does a JBSP Mortgage Work?
A JBSP mortgage is designed to help people on ‘lower’ incomes to get support from someone (usually a family member) who will add their name to the mortgage in order for their income to be used in the assessment. The aim is to essentially use more income to increase the maximum loan available.
As the person assisting in only on the mortgage and not the deeds, they do not pay the 3% stamp duty surcharge for second properties and have no rights over any equity in the property at any time.
Some options allow for up to 4 incomes to be used and go up to age 80 at the end of the term so this can provide further flexibility in terms of the people who are helping.
However, before adopting this approach specialist advice is a must. Just because you can, it doesn’t mean you should. It’s great that people are able to help, but they need to consider this approach carefully before proceeding as they will be liable for the mortgage. It’s possible that the lender may also want them to seek independent legal advice.
For you, the most important points to consider are affordability and stress testing. Can you afford it on your own now? How about when rates go up? Is there a potential change of circumstances that could have an effect?
The next thing for all concerned is an exit plan. It’s great that you are getting help, but you will want to get the mortgage in your own name(s) as quickly as possible so it’s good to plan for this from the beginning so that everybody knows where they stand.
In recent months we have seen in an increase in the demand for advice on JBSP mortgages, especially as the Bank of Mum and Dad continues to play such as important part in the mortgage market.
However, as with anything, careful planning is key to making it a success so please contact us for specialist JBSP Mortgage Advice.