What is a JBSP (joint borrower sole proprietor) mortgage?
Despite house prices continuing to fall since peaking in August of last year, UK property prices remain at an all-time high in relation to average income. For many first-time buyers, this makes taking that first step onto the property ladder an unattainable dream as securing a mortgage becomes difficult. A Joint Borrower Sole Proprietor Mortgage offers a possible solution to this problem.
What is a JBSP Mortgage?
A JBSP mortgage is a means by which to increase the amount a buyer can borrow by adding the income of a family member or friend to their mortgage application. Combining the buyer’s income with the income of another creates a higher combined income that increases the amount that the buyer can afford and may concurrently decrease the size of the deposit required. The family member or friend does not have to pay anything but as they are on the mortgage as a ‘joint borrower’, they will be liable to pay the mortgage if the other party is unable to. However, only the buyer will own the property as the ‘sole proprietor’.
Who can benefit from a JBSP Mortgage?
A JBSP mortgage is particularly useful for first-time buyers who may be struggling to reach that first rung on the ladder in the current economic climate. According to Rightmove, the average asking price of a first-time buyer home of two bedrooms or less is £224,091.
As most mortgage calculators work on the assumption that you can borrow a maximum of four and a half times your income, buying a house at this price would require an income of £55,000, a figure few people in the early stages of their career are likely to be earning. A good course of action for any first-time buyer planning to take this route is to seek joint borrower sole proprietor mortgage legal advice from a reputable solicitor firm, such as https://www.parachutelaw.co.uk/joint-borrower-sole-proprietor-mortgage-legal-advice.
The benefits and drawbacks of a JBSP Mortgage?
The key benefit of a JBSP mortgage is that it allows the homebuyer to purchase a home with a smaller deposit, which enables them to get on the property ladder sooner and with a potentially higher value property. Additionally, being the ‘sole proprietor’ means that only the buyer benefits from the property as an asset.
A potential drawback is that anyone who commits to becoming the ‘joint borrower’ puts their income at risk as they are liable for repaying the mortgage if the buyer cannot, but they have no rights to ownership or the value of the property. The ‘joint borrower’ will also need to be in a good position financially as all parties are subject to a credit check and will only be eligible for the mortgage if they pass.
A JBSP is potentially a powerful financial strategy for accessing the property market, but like all financial strategies, it should be considered in the light of your own personal circumstances and under the guidance of good legal advice.