"We have seen a lot of recent demand for joint borrower, sole proprietor mortgages, with HNW parents taking advantage of the flat property market to help their children onto the property ladder."
For High Net Worth (HNW) individuals, making the capital available to help their children buy their first home can make sense for estate planning as well as family reasons, and this parental help does not have to be limited to just funding the deposit.
With a joint borrower, sole proprietor mortgage, parents or other close relatives can be included in a mortgage application and use their income to support affordability, but they do not have to be considered as residents of the property. This means they can help to subsidise the mortgage payments but do not have to be included on the title.
So, for example, a HNW individual earning £700k a year may want to support her daughter to buy a property valued at £1.5m. The daughter only earns £50k and so even if her parents put down a significant deposit, affordability is likely to be an issue. But with a joint borrower, sole proprietor mortgage, the daughter’s mortgage payments can be subsidised to meet the required affordability.
As both parties are not on the title deeds, this could potentially mean that first-time buyers can continue to benefit from lower Stamp Duty Land tax even if the mortgage is being supported by somebody who is an existing homeowner.
Joint borrower, sole proprietor mortgages are generally used as a way of helping first-time buyers onto the housing ladder, but they are not limited to this group and could provide a solution for children subsidising their parents, movers who want to make the leap to a more expensive home or even assist the purchase of an investment property.
At Investec Private Bank, we have seen a lot of recent demand for joint borrower, sole proprietor mortgages, with HNW parents taking advantage of the flat property market to help their children onto the property ladder.
When it comes to underwriting this type of mortgage, it is important to assess the income of the applicant who will not be named on the mortgage, to ensure that they have the income to meet this additional commitment. With HNW individuals, this often involves assessing multiple layers of income and assets, comprising stocks, shares, carried interest, overseas investments and property, and so a private bank is well placed to underwrite this level of complexity.
