Joint Borrower Sole Proprietor Mortgage
- A joint borrower sole proprietor mortgage allows applicants to get help from a relative or friend. The second borrower will share the responsibility for the mortgage, but they will not be registered on the legal title of the property.
- In this context, if parents are helping their children get a mortgage, they can avoid stamp duty.
- The application process is similar to a regular mortgage, but the additional borrowers must get Independent Legal Advice, as they will share the liability, but will have no benefits.
- Lenders make it a requirement for the potential risks to be understood. We offer a video advice service available from £235 INC VAT with a certificate issued the same day.
What is a Joint Borrower Sole Proprietor Mortgage?
Mortgages are offered to borrowers based on their income. The smaller your income, the less you will be able to borrow.
A Joint Mortgage Sole Proprietor Mortgage is aimed at applicants who cannot afford the full mortgage on their own but can do so with the help of a joint applicant.
This means an applicant with a lower salary can get support from a loved one to jointly apply for a mortgage. The second borrower takes on liability for the mortgage, but won't be a registered legal owner of the property.
What’s the difference between a JBSP mortgage and a joint mortgage?
- Some of the borrowers aren't registered on the legal title.
- All parties, whether legal owners or not, are equally liable to repay the full mortgage debt.
- All parties, whether legal owners or not, are bound by the terms of the mortgage.
- You can avoid second home stamp duty if you draft a deed.
- The non-legal owners don't have the right to sell, use, or transfer their names from the legal title.
Do you need legal advice before proceeding with your mortgage?
Please fill in the form below if you are the only party needing Independent Legal Advice.
Fixed fee of £235 INC VAT
Please fill in the form below if you are an additional party needing Independent Legal Advice.
Fixed fee of £180 INC VAT
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Why would someone use a JBSP Mortgage?
A JBSP mortgage is used often for these two reasons:
- 1
Avoiding Second Home Stamp Duty - the most common reason for using this product.
Parents who own a house can help their children buy a home without incurring the additional rate of SDLT. Similar for unmarried couples buying together.
Married couples rarely use this mortgage because it doesn't matter if either one is on or off the legal title, if a husband or wife owns an interest in another property then they have to pay second home stamp duty.
- 2
Allowing the buyer to be the sole legal owner - similar to the reason for guaranteeing the property, the objective of a parent is to help their adult child buy a home.
With this mortgage, they can do that without needing to have their name on the legal title which gives a feeling of ownership for their children.
Pros and cons of a JBSP mortgage
Pros
- There is no stamp duty liability for the additional borrowers.
- The sole proprietor can take over the mortgage if and when they have a larger income.
- Allows more people to get on the property ladder, and sooner.
Cons
- All borrowers have joint responsibility for the mortgage repayments. If the legal owner defaults on payments, the non-legal owner is left with the debt.
- You cannot use this mortgage as well as a housing scheme like Shared Ownership.
- If the additional borrower is elderly, this could limit the mortgage terms.
Joint Mortgage Sole Proprietor Process
Get a mortgage offer
Several mortgage lenders offer a Joint Mortgage Sole Proprietor product. Each of the mortgage lenders has a different approach to the application and what information they provide for the Independent Legal Advice. We work regularly with these mortgage lenders and can guide you through what you need to do.
Draft a declaration of no beneficial interest
A declaration of no beneficial interest, such as a Deed of Trust, is required for the protection of the parties on the mortgage but not on the legal title. It's used to demonstrate the non-legal owner has zero beneficial interest in the property.
It's important to note that the non-legal owner will have no claim against the lender if they are forced to repossess.
- Protects the legal and mortgage lender - Within the Deed of Trust the legal owner and non-legal owner can set out their intentions for the arrangement such as what to do when either party wants to leave, what happens if you are unable to make mortgage repayments, or who is liable should there be a breach to the terms of the Deed of Trust.
- Evidence of zero beneficial interest - A Deed of Trust can be drafted to evidence a joint borrower has no future entitlement to capital proceeds from the sale of the property to any income, or to occupy the property. Without written evidence, and if in the future any of these benefits are evidenced by HMRC, the transaction could have a higher rate of stamp duty applied to it if the non-legal owner has an interest in another property.
Get Independent legal advice
As part of the mortgage offer conditions, the non-legal owner needs to speak to a legal adviser so they are fully aware of their obligations under the mortgage.
The legal advisers act on behalf of the mortgage lender and are instructed to ensure they have provided independent advice to the non-legal owners in relation to the JBSP mortgage product.
Your solicitor will:
- Review all of the mortgage documentation and financial statements.
- Draft and send an Etridge Letter to you summarising the discussion and asking you to sign and send back an acknowledgement.
- Complete the mortgage certificate and supply it to the bank.
Conveyancing Process
The conveyancing process is the same as a normal purchase. Here are a few scenarios where this type of mortgage product is used:
- A parent can be jointly on the mortgage but their child is the sole legal owner.
- A friend can be jointly on the mortgage but their friend is the sole legal owner.
- A partner can be jointly on the mortgage but their partner is the sole legal owner.
Each circumstance is different and mortgage lenders will review each individual case separately. In every case, separate legal advice is required.
For example, if both parents go on a mortgage but their adult child is the sole legal owner, they may only need one ILA meeting.
Which banks offer a JBSP Mortgage?
Our independent mortgage brokers have access to the whole market and will advise on the best product for your situation. Here is the list of mortgage lenders offering a JBSP mortgage product:
Do you need Independent Legal Advice?
Keep in mind that you must be on your own, with no one else in the room, for the full duration of time that the Independent Legal Advice is being given via video call.
Please fill in the form below if you are the only party needing Independent Legal Advice.
Fixed fee of £235 INC VAT | Availability starting 23/12/2024*
Please fill in the form below if you are an additional party needing Independent Legal Advice.
Fixed fee of £180 INC VAT | Availability starting 23/12/2024*
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
