JBSP Mortgages
A Joint Borrower Sole Proprietor Mortgage is where family or friends can help first time buyers, movers or re-mortgagers get a bigger loan
What this page covers:
What is a JBSP Mortgage?
A JBSP Mortgage is a special kind of home loan. It allows the main borrower’s family and friends to use their income (income boosters) to help the main borrower qualify for a larger mortgage and, if required, help with the deposit (deposit booster). The family and friends are not part-owners of the property and don’t have any rights to it. This mortgage is helpful when the main borrower’s income isn’t enough to qualify for the needed mortgage.
What is an income booster?
An income booster is a general term used by lenders and Mortgage brokers for someone who can go on a Mortgage application to help boost your Mortgage affordability and help you get a larger Mortgage. As already discussed, these can be family or friends.
What is a deposit booster?
A deposit booster is a term used in the lending and mortgage industry to refer to someone who contributes funds to help increase your deposit. This is also known as a gifted deposit.
Can my parents help me get a Mortgage?
Yes, they can definitely help. Depending on their income, they could be a great source of income boost. Also, based on their financial situation, they could assist with your deposit as deposit boosters. Additionally, your grandparents could provide valuable support based on their financial standing.
How can parents help with my Mortgage?
Parents can help with your Mortgage in 3 ways;
- Your parents can provide a deposit for your mortgage and be a Deposit Booster
- Your parents can choose to be included on the mortgage application, and the lender may consider combining their income with yours to increase your borrowing power. This makes them Income Boosters.
- Your Parents could help provide you with a Mortgage Deposit and act as income boosters if you need to increase the amount of your mortgage.
So, as you can see, help can be provided in various ways. Also, do not forget that close family is not the only one who can be an Income or Deposit Booster. Some lenders will also allow friends to be Income or deposit boosters.
Can my friends help me get a Mortgage?
In general, most lenders will consider assistance from family. However, we have access to a few lenders that will also consider help from friends. Depending on their income, friends could be a great source of income boost. Also, based on their financial situation, they could assist with your deposit as deposit boosters.
Who can help me to boost my Mortgage borrowing capacity?
Different Lender have different criteria for who can help Boost your Mortgage Capacity
Some Lender will only allow close family to act as an Income Booster; For most Lenders close family is generally defined as;
- Parents
- Grandparents
- Siblings
- Uncles & Aunts
- Nieces & Nephews
However, Some lenders will allow close Family and Friends to act as Income boosters, so you will have the choice of either family or both Family & Friends being able to help boost your Mortgage capacity.
How is affordability assessed in a Joint Borrower Sole Proprietor Mortgage?
Assessing your mortgage affordability in a JBSP mortgage is undertaken precisely the same as any other residential mortgage, so just like any other mortgage, a JBSP lender will;
Assess the combined income of all borrowers, including any guaranteed bonuses, overtime, & allowable Benefits.
Consider the expenditure of all borrowers. Taking into consideration their existing:
- Mortgages
- Credit card debt
- Car loans
- Personal loans
Undertake credit checks on all borrowers.
The lender will use all the above to assess your mortgage affordability and the amount you can borrow. So, put simply, everybody is subject to the same credit checks, eligibility criteria, and evidence requirements as a standard mortgage.
How many people can be Income Boosters?
As with a lot of these questions, it will depend on the lender to lender, but generally, the number of income boosters varies between 4 – 6 people, and it can be a mixture of families and friends.
Can 3 people buy a house?
Yes, 3 people can buy a house together, and up to a maximum of 4 people can buy a house together. All 3 people can be on the mortgage deeds and a part of the application.
Need to know more about income boosters?
How does property ownership work with a Joint Borrower Sole Proprietor Mortgage? (JBSP)
In a JBSP mortgage, you can decide who will be on the mortgage application and who will be on the mortgage deeds…
- All people on the mortgage application will be responsible for the mortgage payments and responsibilities for the upkeep of the property.
- All people on the mortgage deeds will own the property.
So, in a JBSP mortgage, you can decide on the 2 important points above, depending on your personal needs & circumstances.
For example:
Some parents may already have substantial assets in their name and may not want to increase their inheritance tax exposure. As a result, they could choose to be on the mortgage application only, using their income to boost their children’s mortgage amount without being listed on the mortgage deeds.
This is entirely possible, and we have access to a lender that will do just that without putting the parents into the mortgage deed and avoiding:
- Additional Stamp Duty
- Increasing the parent’s estate and possible inheritance tax
Some parents might want to use their income to boost their children’s mortgage and provide a deposit towards the mortgage. However, for personal reasons, they might want to own a share in the property as a future investment.
It is completely feasible, and we have access to a lender who can make this happen without adding the parents to the mortgage deed, thus avoiding additional stamp duty.
This allows the parents to maintain a financial interest in the property and keep their share as an investment. It can also provide a sense of security for both the parents and the children, while potentially offering financial benefits for everyone involved.
How can my friends help me get a Mortgage?
Your friends can help with your mortgage in 2 ways:
- They can provide a deposit towards the mortgage, AKA as a gifted deposit
- They can decide to be on the mortgage application and use their income to boost the amount of mortgage you can borrow…. AKA becoming an income booster
As per usual, the above will vary from lender to lender.
Can I borrow money from friends and family for a mortgage?
Absolutely!
You can definitely borrow money from friends and family for a mortgage. If the donor does not want to be included in the mortgage, i.e. be a joint borrower and sole proprietor (JBSP), then they can simply provide you with assistance for the deposit.
This is typically known as a gifted deposit, and many lenders will accept a gifted deposit from close family members and some even from friends. The person providing the gift must provide a letter confirming that the money given is indeed a gift and not a loan.
Your mortgage broker will provide you with a template of the letter to sign, a copy of which will go to the lender.
Which banks offer Joint Borrowers Sole Proprietor mortgages?
The number of lenders offering Family & Friends Mortgages is increasing each year. We have access to at least 35 banks and building societies that provide this type of mortgage. Some well-known names include:
- Barclays joint Borrower Sole Proprietor Mortgage
- Skipton Mortgage joint Borrower Sole proprietor Mortgage
- Kent & Reliance joint Borrower Sole proprietor Mortgage
Less familiar names also offer this type of mortgage, such as Gen H joint Borrower sole proprietor Mortgage
Each lender has its own set of criteria and rules, but as you can see, plenty of options are available to tailor a family & friends mortgage to suit your needs.
Joint Borrower Sole Proprietor mortgage rates
The increasing popularity of the JBSP Mortgage has attracted more lenders to offer their versions, leading to increased competition and reduced interest rates. Now, you can enjoy competitive rates like other mortgage products, making finding the best JBSP Mortgage rate easier.
Do bear in mind that the JBSP rates for all mortgage lender change on a weekly Basis.
How is a Joint Borrower Sole Proprietor mortgage different to a joint mortgage?
In a Joint Ownership Mortgage, all applicants named on a joint mortgage application are also registered as legal property owners on the mortgage deeds.
On the other hand, with a Joint Borrower Mortgage, the person or persons helping and allowing their income to be calculated for affordability criteria will be on the mortgage application. Still, they will not go on the mortgage deeds and, thus, will not have any ownership of the property.
Joint Borrower Sole Proprietor Mortgage Stamp Duty
Starting from April 1st, 2021, first-time buyers are not required to pay Stamp Duty on properties valued under £300,000.
In a typical Mortgage scenario, if a parent who already owns a home applies for a joint mortgage with their son or daughter, they would not be eligible for the first-time buyer stamp duty exemption. As a result, their child would also not qualify for this exemption, and they would both end up paying stamp duty and an additional 3% at the second property rate.
When applying for a JBSP mortgage, the parent or friend is listed only on the mortgage application. They sign a declaration to confirm that they do not have any legal ownership of the property. This declaration indicates that they have no interest in the property and will not be included in the mortgage deeds. This bit of magic ensures that in this JBSP application, the applicant can qualify for the first-time buyer Stamp Duty Exemption.
Joint Borrower Sole Proprietor Mortgage Age Limit
Determining the maximum age allowed on a JBSP mortgage can be challenging due to various factors and each lender’s rules on the age limit for JBSP Mortgages. Generally, age limits work in two ways:
- Some lenders will work out the maximum age limit based on age of the borrowers and will allow the maximum mortgage term till age 75.
- When applying for a JBSP mortgage, some lenders consider the ages of the main borrower and any additional borrowers. They may allow a maximum age of 85. For example, if the main borrower is 30 years old and an additional borrower, like a parent, is 55 years old, some lenders might offer a 30-year mortgage that lasts until the parent turns 85.
Joint Borrower Sole Proprietor mortgage tax implications
The 7 year rule
When parents gift money, it’s important to be aware of the 7-year rule in relation to inheritance tax (IHT). Under UK law:
- Gifts are exempt from inheritance tax if the giver lives for seven years after the gift.
- If the giver dies within seven years, the gift may be subject to IHT, though taper relief could reduce the tax owed if the death occurs after three years.
Annual gifting allowances
Each person can gift up to £3,000 a year without any inheritance tax implications. If you didn’t use this allowance the previous year, you can gift up to £6,000.
Large gifts
Gifts above these allowances may be subject to IHT if the giver passes away within seven years.
Parents should consult a financial advisor to ensure that their gifting strategy aligns with both their immediate goals and long-term estate planning.
Joint Borrower Sole Proprietor Mortgage - independent legal advice
Being a Co-borrower or Income booster on a JBSP Mortgage comes with complications and implications that will be very personal to you and it is very important you understand what you are getting involved in and your responsibilities so it’s vital that you have all the information to hand.
So all JBSP mortgage lenders will require the co-borrowers to get Independent Legal Advice (ILA ) from a regulated Solicitor / Conveyancer and is part of their mortgage terms.
During your ILA meeting, you will be able to ask all of the tough questions and know you are getting unbiased advice.
Your JBSP Mortgage advisor will be able to arrange your meeting with a competent ILA Solicitor.
Some questions you could ask your JBSP independent legal advice lawyer:
- What if I have a disagreement with the legal owners and want to be repaid immediately?
- Will signing this agreement have any impact on my ability to get a loan or a mortgage in the future?
- What if I want to gift, transfer, or purchase equity in the property in the future?
- What if the legal owner makes a partial payment, misses a payment, or stops paying the mortgage altogether?
- When will I be able to stop being a booster? How do I stop being a booster? Can I be removed during a fixed interest term?
- How are my contributions to the mortgage tracked?
- What happens if I die, or if the legal owners die?
- If things go badly, is my property at risk? Can Gen H take legal action against me?
- What rights do I have over the property?
- Can the legal owners sell without my consent? Can the legal owners remortgage without my consent? Can the legal owners extend the mortgage term without my consent?
- What happens if the owners can remove me but choose not to? Is it my choice of when or how to remortgage?
- What if the owners extend the mortgage term at remortgage? Am I just on the hook longer than I originally signed up for?
- What happens if the owners can’t afford the mortgage when I turn 85?
- What happens if I can’t afford to help out as I get older?
What happens if the legal owner dies?
In the event of the legal owner passing away before the end of the mortgage term, the executors of the legal owner’s estate will be responsible for putting the property up for sale, selling the property and settling the mortgage from the proceeds.
An important point to note is that until the property is sold, all parties to the Mortgage are legally obligated to pay the FFM mortgage monthly payments.
Can I end a JBSP mortgage and how do you do it?
Yes, you can get this sorted out and convert it to a normal mortgage. However, this would only be possible if you, the homeowner, can afford to repay the mortgage on your income without your friends & family’s support. So, at this stage, a new application must be submitted, and affordability must be assessed based on your sole income.
Important point – if you are in a fixed rate agreement and you want to end your JBSP mortgage, you could end up paying redemption charges, so depending on your circumstances, it could be wiser for your fixed rate to be near its end date before you consider this move.
How parents can help their child get an increased mortgage with JBSP Mortgages
Example:
Meet Sarah and her parents, John and Mary:
- Sarah’s Situation:
Sarah is looking to purchase her first home on the outskirts of London. She’s interested in a 2-bedroom property and plans to rent out one of the rooms to help with monthly payments. Her annual income is £35,000, and she anticipates earning more over the next five years. She has saved £30,000 for a home priced at £300,000. However, upon going onto Lenders’ Websites and using their Calculators, she discovered that, based on her income, she could only borrow up to £157,500, which is much less than the price of the home she wants.
- John and Mary’s Situation:
John and Mary, Sarah’s parents, both work and have a combined annual income of £60,000. They have excellent pension provisions for their retirement. They have already paid off their home and have no plans to buy another property. They have no other debts besides credit cards, which they pay in full every month.
Using a JBSP Mortgage to increase the borrowing power:
Sarah’s parents decided to help her by applying for a Joint Borrower Sole Proprietor (JBSP) mortgage. This allows their income to be considered in the mortgage affordability assessment without them being listed on the property’s title deed. In this example, we are using an income multiple of 4.5. However, this may vary from lender to lender.
Calculation:
Sarah’s Borrowing Capacity Alone:
- Sarah’s income: £35,000
- Lender’s income multiple: 4.5
- Maximum loan Sarah could get alone: £35,000 X 4.5 = £157,500
Combined Borrowing Capacity with Parents:
- Sarah’s income: £35,000
- John and Mary’s income: £60,000
- Combined income: £35,000 + £60,000 = £95,000
- Lender’s income multiple: 4.5
- Maximum loan with combined income: £95,000 X 4.5 = £427,50
With her parents’ income added to the mortgage application, Sarah can now borrow up to £427,500, which significantly increases her purchasing power.
Outcome:
- Property Price: £300,000
- Deposit: £30,000
- Required Mortgage: £270,000
With the JBSP mortgage, Sarah can comfortably secure the £270,000 mortgage needed to purchase her dream property, thanks to the combined borrowing power of herself and her parents. In addition, in 5 years, when Sarah increases her earnings and can afford the mortgage on her sole income, she can apply to the lender and take her parents off the mortgage.
Important considerations:
- Although John and Mary’s income is considered for affordability purposes, they are not joint property owners. This means Sarah is the sole proprietor of the home.
- Both John and Mary are jointly liable for the mortgage repayments alongside Sarah, so all parties must be comfortable with this arrangement.
- Any Income Boosters must seek independent legal and financial advice before entering a JBSP mortgage to understand their responsibilities fully.
This example clearly shows how a JBSP mortgage can significantly boost the borrowing capacity of a first-time buyer by using the income of their parents, making it easier for them to afford a home in today’s market.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
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