Joint Borrower Sole Proprietor Scotland
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Joint Borrower Sole Proprietor Scotland
What is a Joint Borrower Sole Proprietor (JBSP) mortgage and how do they work?
Basically, you have one person who owns the property and has their name on the title deeds, but the mortgage is in two people’s names. In fact, it could actually be up to three people’s names.
The ‘sole’ person legally owns the property, but the mortgage might be based on somebody else’s salary or credit profile. The other person is boosting the affordability to secure the funding. So the person who’s not named on the property title has all of the mortgage liability but owns none of the asset.
What criteria do you need to meet for a JBSP mortgage in Scotland?
A lot of the criteria is much the same for any mortgage, and it’s certainly the same in Scotland as the rest of the UK. Lenders will be looking at your affordability, which means your income from whatever source, plus your age, any financial dependents and your credit commitments.
It’s very typical with a JBSP mortgage that a parent is the joint borrower and an adult child is sole proprietor. The parent might be trying to help their child get onto the property ladder – perhaps they’ve got a bigger income or could contribute to the deposit.
In that scenario, the lender will take into consideration the parent’s age, which often means the term that you could take the mortgage over is less than it would be for a younger person. That will impact the monthly costs.
Do you pay stamp duty on a JBSP mortgage?
Stamp duty has now been replaced by Land and Buildings Transaction Tax. We still call it stamp duty, because – just like Joint Borrower Sole Proprietor – the new name doesn’t roll off the tongue.
An important benefit of JBSP is that if the borrower who isn’t named on the title deeds owns another property they will not be liable for the additional dwelling supplement. However, normal LBTT would still apply.
Can you have a sole mortgage on a joint property?
With the majority of mortgages, the property title ownership and the people named on the mortgage must match. It’s only with this Joint Borrower Sole Proprietor scheme that there could be any divergence from that.
This scenario allows another person who’s not named on the property title to be taken into consideration for the mortgage. But it’s unusual. You couldn’t have a couple who owned the property title, but only one person on the mortgage. Lenders wouldn’t allow that.
What’s the difference between a joint mortgage and a JBSP mortgage?
With a joint mortgage, the people named on the property title both have liability for the mortgage finance, and they also have a share of the asset – the property.
With a JBSP mortgage, the joint borrower has liability for the mortgage but is not named on the property title.
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What’s the difference between a guarantor mortgage and a JBSP mortgage?
Guarantor mortgages are almost obsolete now. If you need help from somebody to secure the mortgage finance you need, a JBSP may be the right option.
With other guarantor mortgages, there might have been an element of liability for part of the mortgage, but they’re very rare now.
Can I get a JBSP mortgage with bad credit?
Yes, it’s one of the biggest things we get asked. And the answer is always ‘maybe’.
We are always happy to speak to people who have concerns about that. I say to people, tell me the whole truth and nothing but the truth. Let me see your credit file and I could advise you on whether we could find a lender who may accommodate you.
It could be a timescale issue, where we just need to wait for a couple of months, or do something to improve your circumstances. The criteria around bad credit is changing all the time.
Your bad credit might not be as bad as you think it is. It’s better to have a chat with us to see if it’s going to cause you a problem or not.
How does remortgaging a Joint Borrower Sole Proprietor mortgage work?
You usually have to move from one of these products to another, and only a few lenders offer them.
We would need to consider whether it’s worth remortgaging to another lender, as you would have a lot fewer options to consider. If you just come to the end of your product, you will always be offered a different product from your existing lender.
A lot of people use JBSP to help a child or young adult own a property whilst they’re a student, for example. Then, once they graduate and start to earn a salary, they’ll expect to remortgage into the young adult’s name alone. That’s all possible.
It’s probably not ideal to have this kind of arrangement long term, if you could avoid it.
What are the pros and cons of a joint borrower sole proprietor mortgage?
The big pro is that a parent or somebody else could help you buy a property, where you wouldn’t otherwise be able to. A student with no income is a perfect example of where this works well.
Because the Joint Borrower isn’t named on the property title, if they own another property, they don’t have to pay the additional dwelling supplement – a huge tax.
The key disadvantage is that the joint borrower has no ownership of the asset of the property so they can’t force the sale. If the Sole Proprietor on the mortgage runs away with the circus, the lender will come after the Joint Borrower for the mortgage funds. You need to have a good relationship with the person that you are doing this with.
What else do we need to know about Joint Borrower Sole Proprietor mortgages?
It’s with these schemes that a mortgage advisor could really come into their own. More lenders could have quite fickle criteria at times.
It’s also very important when you’re going into arrangements like this that you fully understand your responsibilities and liabilities. You need to explore the worst case scenario and be comfortable with it.
Having you know a mortgage advisor by your side while you go through that is very, very useful.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Useful Links
- First Time Buyers
- Agreement in Principle
- First Time Buyer Joint Mortgages
- Self Employed Mortgage First Time Buyer
- 5 Percent Deposit Mortgage Scotland
- Shared Ownership Mortgage Scotland
- Joint Borrower Sole Proprietor
- Guarantor Mortgage Scotland
- Gifted Deposit Mortgage
- Offers Over Home Report
- Mortgage Guarantee Scheme Scotland
