What is a Joint Borrower Sole Proprietor mortgage?
This type of mortgage, is where not all parties to the mortgage, are the legal owners of the property.
For example, if there are two borrowers, or even more as some lenders will allow up to 4 applicants, all people in question will be on the mortgage, but only one person could be named on the title of the property.
When would you require this type of mortgage?
It may be that as a first-time buyer, you may struggle to get onto the property ladder, so many first time borrowers are joining forces with either their friends or family members to combine deposit monies and incomes. This could increase the overall income by combining several salaries to make buying a property more achievable. Joint Borrower Sole Proprietor mortgage applications have begun to increase and selected lenders are offering them.
This solution, may work for parents, who own their own home, and want to help their children buy a property, however they may not want to be caught by the increased stamp duty that could apply if they had to appear on the title deeds of the property.
Can I use a joint borrower, sole proprietor mortgage to protect any assets?
Many people who own a business may want to protect their home in the event that if their business fails, this could lead to their home being taken as payment for any outstanding debts.
A Joint borrower Sole Proprietor mortgage allows business owners to put their home in a partner’s name, therefore keeping the property completely isolated from any other assets that could be taken.
The owner of the business can make the monthly payments for the mortgage, however their home is not at risk as their name is not on the property deeds.
What could go wrong if you use a Joint borrower Sole proprietor Mortgage to purchase a property?
It’s a mortgage that is being increasingly used by lenders, this means a borrower with a lower salary, may get support from someone else, usually a family member (this does depend on the lenders criteria), to apply for a mortgage. The borrower/s that would be supporting the purchase would not be named on the deeds of the property, this means that, as a non-legal owner of the property, they won’t be able to be entitled to any gain in the property, be it that it is rented out (rental income) or if the house price increases in the future.
If the relationship were to break down between any of the parties it would be difficult for the named borrower/s – (non legal owner) to have their name removed from the mortgage, because of the type of mortgage that has been taken out. It is also possible that the legal owner could not afford the mortgage on their own, meaning that the non-legal owner could be faced with a lengthy and costly legal battle to remove their name.
On the other hand, it means that the supported applicant /s may be able to get a foot on the property ladder when they may not have been able to without the help of others.
Most lenders require that all borrowers on this type of mortgage obtain Independent Legal Advice before completing.
Do you have an exit plan for the mortgage?
It is really helpful to have an exit plan for the mortgage. May be in the future you want the mortgage solely in your name and/or may be add a partner to the mortgage.
Over time if your income increases and the mortgage debt decreases, having the mortgage in solely your name could be more achievable.
If you fall into financial trouble and struggle with the payments, the additional named person is liable for the mortgage payment. If this were to happen would you sell the property to clear the debt?
These conversations should take place before applying for a joint borrower sole proprietor mortgage.
Can you afford to pay the mortgage on your own?
The most important thing to consider is whether you can afford to pay a joint owner, sole proprietor mortgage on your own.
If you are adding someone to the mortgage but intend to finance the mortgage payments yourself, keep in mind that the other person will be legally obliged to pay the mortgage if you don’t or you find that you cant, they would need to seriously consider all of the financial implications involved that will affect them.
It can be very useful to sit down and calculate your income and future outgoings once your mortgage is approved, including:
Other bills including gas, electricity and water, telephone contracts.
Insurance (building & contents).
Any maintenance or repairs that may be needed on the property.
Other financial commitments including your outstanding debts and ongoing finance payments.
On going Living costs
What term can I take Joint Borrower Sole proprietor mortgage over?
Like most mortgages, the maximum age at the end of a mortgage term can be as high as 80 years old (maybe older) though some lenders don’t really set a maximum age limit.
This could be beneficial for everyone involved if all parties are contributing towards the mortgage, as it means the repayments can be spread over a more affordable term.
Is a joint applicant, sole proprietor mortgage for residential properties only?
No, you can apply for a Joint borrower sole proprietor mortgages for both residential and buy-to-let mortgages. Also, this type of mortgage could also be used for a buy to let application for a student or Student Buy To Let, meaning that your child could be living in the property whilst at university or adult training and then consider renting it out after they finish to enable income to be generated from the rental payments.
What fees would I have to pay for this type of mortgage
Deposit – This will vary depending upon lender criteria.
Stamp duty – (if any payable) dependant on property value.
Solicitors fees – typically part is paid upfront and the remainder on completion.
Valuation – generally payable upfront.
Lender arrangement &/or broker fees – these may be paid upfront, on offer or on completion. Your quotation will detail all associated fees and when payable.
How can I obtain a Joint Borrower Sole Proprietor Mortgage.
With a mortgage such as this, it may only be provided by certain lenders, speaking to an adviser at The Moneyhub Limited that has a large lender panel for the necessary advice on getting a mortgage would be instrumental to applying for this sort of application.