There are many different types of mortgage options for homebuyers in the UK – and one of these is a Joint Borrower Sole Proprietor mortgage. If you are struggling to secure a high enough loan for the property you want to buy, due to your salary being too low, then this type of mortgage is perfect for you.
In the blog below, we’ve explained exactly what this type of mortgage is, why you might seek to capitalise on it, and the pros and cons of doing so. Read on to find out all of these answers.
What is a Joint Borrower Sole Proprietor Mortgage?
A Joint Borrower Sole Proprietor mortgage is when a potential homebuyer adds a friend or family member’s income to their mortgage application, so they are able to increase the amount they are borrowing.
The help you receive in a Joint Borrower Sole Proprietor mortgage can be from up to four people, including your parents. Nevertheless, the title deeds are still only in one person’s name.
As soon as the initial deal period ends and early repayment charges no longer apply, the sole property owner is able to switch the mortgage to their name only.
You should keep in mind that not all mortgage lenders offer Joint Borrower Sole Proprietor mortgages. You should conduct thorough research to find out which companies offer this in your area.
Why would you get a Joint Borrower Sole Proprietor Mortgage?
Joint Borrower Sole Proprietor mortgages are an excellent option for first time buyers, as it enables them to borrow more money for their mortgage, by increasing their income. For many buyers in this position, it is not the deposit which makes getting the property ladder so difficult – it is having a high enough salary to cover the amount they are borrowing, too.
A Joint Borrower Sole Proprietor mortgage is also advantageous for the mortgage lender, because it means that if the homebuyer fails to make their repayments, there is someone else who is equally responsible for paying back the mortgage. This type of mortgage is therefore a ‘safer bet’ for lenders.
Pros of a Joint Borrower Sole Proprietor Mortgage
In a Joint Borrower Sole Proprietor mortgage, it is only the homeowner who has their name on the property’s title deeds. This is an advantage for the buyer, because it means that they are the only person who benefits from its value, which is not the case with alternative options, such as a joint mortgage.
A Joint Borrower Sole Proprietor mortgage can also be invaluable in helping someone get onto the property ladder. It is often young people who go down this route – and from a financial point of view, it can change their life for the better. Furthermore, the main buyer can take over the mortgage entirely once they have a larger income, so they aren’t stuck in this situation forever.
With a Joint Borrower Sole Proprietor mortgage, there is also usually no stamp duty liability for the additional borrowers.
Cons of a Joint Borrower Sole Proprietor Mortgage
With a Joint Borrower Sole Proprietor mortgage, all parties are equally responsible for repaying the mortgage. While this is advantageous to the mortgage lender, it means that the friend or family member who has provided financial assistance increases their risk, without having any rights to the value of the property.
Another drawback of a Joint Borrower Sole Proprietor mortgage is that all people involved must pass a credit check. This means that even if the buyer (for example, a young person with an excellent credit score) passes the check, they may be held back by someone else’s bad credit score. In some instances, this limits the number of options a buyer has for who can/can’t add their income to their mortgage application.
It is sometimes the case that the mortgage lender will restrict who lives in the house. This is an unwanted issue for some homeowners.
Furthermore, a Joint Borrower Sole Proprietor mortgage cannot be used with other housing schemes in the UK, such as Help to Buy.
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