A joint borrower, sole proprietor mortgage product is aimed at mortgage applicants who do not have the affordability to get a 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 family member, partner or friend to jointly apply for a mortgage, but they won’t be a registered legal owner of the property.
How Parents can help their children get on the ladder
Gifting or lending a deposit to your child
You can boost your child’s deposit by offering them cash towards it. If you’re thinking of doing this, there are a couple of things you’ll need to be aware of first.
Firstly, your child’s mortgage lender may require proof that the money came from you.
If you’re gifting the cash, you can usually provide a letter confirming this and stating that it won’t need to be paid back.
If you are lending them the money, you’ll also need to confirm this as the lender will want to factor repayments in its affordability calculations.
You may also be required to sign a declaration that you have no legal interest in the property, and your child’s conveyancer might request bank statements as proof of the cash gift or loan as part of their money laundering checks.
With guarantor mortgages, the amount your child can borrow is based on your income and assets, as well as theirs.
You’d be guaranteeing to meet any repayments that your child failed to pay, which could be risky, especially if you still have a mortgage on your own home.
A joint mortgage considers both your and your child’s income, as well as any money outstanding on your own mortgage.
You’ll usually both be named on the mortgage agreement and on the deeds, providing you with some power over any future transactions. But you would also be liable for keeping up the mortgage repayments and, if you already own a property, you’ll probably have to pay the second home stamp duty surcharge.
Joint borrower sole proprietor mortgages
With a joint borrower sole proprietor mortgage, much like a regular joint mortgage, the lender assesses both your and your child’s financial circumstances when deciding whether and how much to lend.
The key difference is that only your child is named on the property deeds, meaning they alone own the property.
Both you and your child are responsible for the mortgage repayments, though.
What are the benefits of a joint borrower sole proprietor mortgage?
- Your child may be able to borrow a larger amount than if they were applying on their own
- Unlike a guarantor mortgage, a JBSP mortgage won’t require you to put up additional security, such as your home or savings, to guarantee the loan
- As you won’t own any share of the property, you won’t have to pay the second home stamp duty surcharge
JBSP mortgage eligibility
If your child can show that their salary is likely to increase in the future, a lender may be more likely to approve your application.
Lenders also take the age of the parent into account, considering how old you’ll be by the end of the mortgage term.
If you have a mortgage on your own property, you could consider freeing up cash by remortgaging. This would involve arranging a new mortgage with your existing provider or transferring to another lender.
A further advance from your existing lender is another form of loan you could get that would be secured on your home.
Before remortgaging it’s important to consider the impact that increased borrowing would have on your own standard of living and your retirement plans.