There are many different types of mortgage options for homebuyers in the UK.
A Joint Borrower Sole Proprietor mortgage is one of these.
In this blog, we’ve explained what this type of mortgage is, why it’s used, and it’s pros and cons .
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.
It enables them to increase the amount they are borrowing and up to four people can be listed in it.
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. 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. They struggle to get regular mortgages.
A Joint Borrower Sole Proprietor mortgage is also advantageous for the mortgage lender. If the homebuyer fails to make their repayments, there is someone else who is equally responsible for paying back the mortgage.
Pros of a Joint Borrower Sole Proprietor Mortgage
Name on title deeds
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.
Getting on the property ladder
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.
Flexibility
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.
No stamp duty liability
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
Responsibility for co-signers
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.
Credit checks needed
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.
Restrictions
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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