Joint borrower-sole proprietor (JBSP) mortgages allow two or more people to buy a property together, but only one person takes ownership. This can be an excellent solution to help children or grandchildren with a first property purchase. But how do JBSP mortgages work, and what are the benefits?
JBSP vs. guarantor mortgages
JBSP mortgages have mostly replaced old-fashioned ‘guarantor’ mortgages, which were unpopular among lenders. Lenders viewed guarantor mortgages as risky, and would only take guarantees from immediate family members as a result. JBSP mortgages are essentially upgrades on guarantor mortgages, and offer borrowers more flexibility.
How do JBSP mortgages work?
The guarantor becomes a ‘borrower’, so their credit rating is also affected if repayments aren’t met. This gives lenders more confidence when loaning to buyers, as the additional borrower (the guarantor) has a vested interest in keeping up with the mortgage payments. The additional borrower doesn’t take ownership of the home, avoiding capital gains tax, inheritance tax, or stamp duty implications.
Older-style guarantor mortgages typically assumed the guarantor would be released after a five-year period. However, with JBSP mortgages, the additional borrower’s income can be relied on for the full mortgage term. This means that, in many cases, larger mortgages can be obtained.
Some lenders will allow up to four people to take out a JBSP mortgage, with just one owning the property. This can be helpful for would-be homeowners seeking to buy a property alongside a sibling (potentially with parental support).
Property ladder assistance
In many cases a property purchase is unaffordable without substantial help from parents or grandparents. JBSP mortgages provide a valuable loophole: family members can help children or grandchildren buy a first home, without being tied to the property as a joint owner, with the various tax liabilities that entails.
Not just family members
Certain lenders allow non-family members to participate. This can be helpful when people are looking to purchase a property alongside a partner. In some cases their partner could act as the guarantor (or additional guarantor alongside parents), with this ‘pooling’ of borrowing capacity allowing the buyer to achieve a larger mortgage, with potentially better rates.
As with any mortgage, borrowers must meet various criteria, which vary from lender to lender. Lumin’s in-house mortgage experts can help you find the best option. Call 03300 564 446 for more information, or get in touch using our contact form.
This article is for general information purposes only and does not constitute financial advice or a personal recommendation. Your home or property may be repossessed if you do not keep up repayments on your mortgage. Mortgage availability and terms depend on your individual circumstances and are subject to lender criteria.
