"Applying for a JBSP mortgage is a straightforward process that opens up enormous potential for would-be borrowers such as first-time buyers to get a helping hand onto the property ladder."
While some first-time buyers have been fortunate enough to receive money from parents and grandparents to help them buy their first home, for many others this is not a viable option and the challenges to homeownership remain.
The fact is that not all parents or grandparents can afford to contribute a lump sum or donate all their savings towards a property purchase, particularly during the challenging economic climate of financial uncertainty and escalating living costs currently seen across the UK.
But for those parents still working, using their employment income as a way to increase their children’s borrowing potential by applying for a Joint Borrower Sole Proprietor (JBSP) mortgage could help their kids get ahead by helping them get onto the property ladder.
JBSP mortgages work by combining the incomes of up to four family members which helps to boost the borrowing potential of would-be homeowners who would otherwise be unable to purchase a property on their own. Although a family member is often considered to be a parent and child, other close familial relationships such as brothers, sisters and step parents can also be considered.
In total, a maximum of four people can be named on the mortgage which includes up to two applicants and two supporting borrowers, the latter from the same household. Although the supporting borrowers are named on the mortgage deeds, they have no legal ownership of the property itself, which means there is no potential stamp duty surcharge liability.
Mortgage terms are typically two and three-years and are determined by the applicant’s ability to be able to cover the mortgage payments at the oldest applicant’s retirement age, or in our case, at age 70 at 95% LTV or aged 80 at 70% LTV.
For the self-employed, accounts from the last financial year are used to determine loan value, rather than an average from the last two years, which is particularly beneficial to those applicants who have experienced increased business levels over the last 12 months. Similarly, construction industry scheme workers, temporary workers and zero-hour contractors are all considered, with only six months’ worth of track record required.
For those with a cash deposit, an LTV of up to 95% is available, while those without a deposit can borrow 100% of the mortgage required in return for a 20% deposit in a savings account or a 20% legal charge on the supporting borrowers’ property. Non-occupying borrowers can also remove themselves from the mortgage at any time via a transfer of equity, with the remaining borrowers required to apply for a mortgage in their names.
Applying for a JBSP mortgage is a straightforward process that opens up enormous potential for would-be borrowers such as first-time buyers to get a helping hand onto the property ladder. It’s also beneficial for working parents reluctant or unwilling to donate a significant portion of their savings to help their children buy a house, as they can use their income to boost their children’s borrowing potential and help them buy a property of their own. And this is a product type which is only likely to grow in prominence over the course of 2022 and beyond as a variety of FTB challenges continue to emerge.