What is a joint borrower sole proprietor mortgage?

Joint borrower sole proprietor (JBSP) mortgages are an emerging, niche mortgage type that allows up to four borrowers to pay the instalments while one borrower is the legal owner.

Summary

• JBSP mortgages allow up to four borrowers to fund the mortgage.
• Only one borrower is registered as the owner.
• The tax implications of a JBSP mortgage differ between the borrowers and the proprietor.
• JBSP mortgages offer easier qualifications and higher borrowing capacity.

What is a joint borrower sole proprietor mortgage?

A joint borrower sole proprietor (JBSP) mortgage is a type of mortgage where multiple individuals can be named borrowers, but only one person is listed as the sole proprietor of the property.

This means that all borrowers are equally responsible for repaying the mortgage, but legally, only one person is considered the property owner. 

What is the difference between a JBSP mortgage and a joint mortgage?

A JBSP mortgage differs from a traditional joint mortgage in a few ways.

It’s vital that you understand these distinctions before choosing the right option.

Here are five ways in which they differ:

1. Ownership structure

• Joint mortgage: All borrowers are joint property owners and legally own an equal share of the property.
• JBSP mortgage: All borrowers are responsible for the mortgage, but only one is listed as the property's sole proprietor and legal owner.

2. Credit and income considerations

• Joint mortgage: The income and creditworthiness of all borrowers are considered collectively.
• JBSP mortgage: The income and creditworthiness of all borrowers are still significant, but having one borrower with a more robust financial standing can help them qualify for a larger loan.

3. Property rights and decision-making

• Joint mortgage: All borrowers have equal rights to the property, and decisions pertaining to the property must be made collectively.
• JBSP mortgage: The sole proprietor has the exclusive right to make decisions about the property, and other borrowers may not have the same level of control.

4. Tax implications

• Joint mortgage: All joint owners must be eligible for tax benefits associated with home ownership.

• JBSP mortgage: Tax implications may differ as only the sole proprietor is the legal owner. Other borrowers don’t need to pay stamp duty or capital gains tax.

5. Fees and costs

• Joint mortgage: All borrowers typically share the fees associated with a joint mortgage.
• JBSP mortgage: Fees may vary, especially regarding those related to the sole proprietorship or additional legal documentation.

What are the advantages and disadvantages of a JBSP mortgage?

A JBSP mortgage has its share of advantages and disadvantages.

Advantages

The advantages of a JBSP mortgage include:

• Higher borrowing capacity: A JBSP mortgage allows you to combine financial resources with other people to increase your borrowing capacity, which is especially useful if one borrower has a higher income or a better credit score. 
• Easier qualification: A JBSP arrangement can make qualifying for a mortgage easier by considering the collective financial strength of all borrowers.
• Assistance for first-time buyers: Parents can help their children become homeowners by providing support through a JBSP mortgage.
• Lower risk for lenders: JBSP mortgages are considered lower risk by some lenders, meaning they can offer more favourable terms such as a lower interest rate, or they may accept a smaller deposit. 

Disadvantages

Some of the disadvantages of a JBSP mortgage include:

• Limited control for additional borrowers: The non-proprietor borrowers in a JBSP may have limited control over property-related decisions, potentially leading to conflicts.
• Potential legal and financial risks: Non-owners who borrow for a mortgage are financially responsible but lack legal ownership, exposing them to risks without any benefits.
• Exiting the arrangement: Exiting a JBSP mortgage arrangement can be complicated when one borrower wishes to sell their share, or there are changes in relationships. 
• Tax implications and benefits: JBSP mortgages have complex tax implications, and seeking professional advice is crucial to understand the specific tax consequences.

Which banks offer a JBSP?

Many banks and high-street mortgage lenders offer niche JBSP mortgages as they are becoming more popular.

However, they don't always go by the name "JBSP."

For instance, some lenders refer to their JBSP-type mortgages as “Lend a Hand,” “Family Springboard,” “Family Deposit,” or “Income Booster.”

Each lender's mortgage criteria can vary widely, meaning you might qualify for one but not another, so it's best to research before applying or talking to a qualified mortgage broker. 

The banks and building societies below offer JBSP mortgages:

• Barclays
• Bath Building Society
• Furness Building Society
• Newcastle Building Society
• Skipton Building Society

The rates for joint and JBSP accounts are often similar, starting with an initial fixed rate for a set period and then moving to a variable rate for the remainder of the mortgage term. 

However, borrowers may be able to negotiate a lower interest rate on a JBSP mortgage based on a higher combined income and repayment strategy.

What else should you consider before taking out a JBSP mortgage?

While JBSP mortgages offer hope for first-time home buyers, several factors must be considered beforehand.

Consider these five factors before taking out a joint mortgage:

1. Seek legal advice and understand each borrower's legal implications, rights, and responsibilities.
2. Assess the financial stability of all borrowers and establish clear terms for sharing mortgage repayments.
3. Have a well-defined exit strategy for potential scenarios such as selling the property or refinancing.
4. Explore insurance options to provide financial security in case of unexpected events.
5. Consult with finance and tax professionals to understand the tax implications of the mortgage arrangement for each borrower.

Want to learn more about mortgages?

Joint borrower sole proprietor (JBSP) mortgages are ideal for those looking to get on the property ladder as they allow up to four people to finance mortgage repayments.

However, it’s essential to remember that only one person in a JBSP is the legal owner and not all UK banks offer JBSP mortgages.

However, they are growing in popularity, so more mortgages may be available in the future. 

If you’re interested in buying property, it’s always a good idea to seek the help of a mortgage broker who can offer expert advice and guidance.