Dear Newbury Building Society,
My wife and I would like to help our daughter buy her first property. We’ve recently heard about something called ‘Joint Borrower Sole Proprietor’ and we’re wondering what it means and if it could be an option for us. Can you give me some information about how it works?
Of course! With the Bank of Mum and Dad remaining one of the UK’s largest lenders, and many first-time buyers still struggling to access the housing market, it’s unsurprising that many parents (and grandparents) are looking for ways in which to help their children or grandchildren fly the nest.
The most obvious of those ways is, of course, gifting a deposit, but it’s not the only one. Joint Borrower Sole Proprietor is another avenue to explore – here’s some information that we hope you will find helpful.
What is a Joint Borrower Sole Proprietor Mortgage?
A Joint Borrower Sole Proprietor mortgage (sometimes known as JBSP) allows two or more people to buy a property together, but with one person taking ownership of that property. This is the key difference from a joint mortgage, where all of the property purchasers are also the owners.
The potential advantages
In this case, you and your wife could use your income to boost your daughter’s overall affordability, but without being named on the title deeds, meaning she could potentially afford a bigger property or a property in a more desirable location, for example.
If you are already a homeowner, a JBSP mortgage also means that you wouldn’t need to fork out for the extra 3% stamp duty applied to second homes or pay capital gains tax if and when the property is sold.
A JSPB mortgage can be used as a stepping-stone to financial independence, providing the temporary support that many first-time buyers need to step up on to the property ladder. If and when your daughter’s circumstances change (for example, a pay rise) she could be able to remortgage and remove you from the arrangement.
Things to be aware of
The mortgage application process would look very similar to buying a property solo. Income and expenses will still be considered, and there may be other criteria set by the lender that she or you would need to meet.
You should also be aware that all borrowers in the arrangement have joint responsibility for the mortgage payments. While this lowers risk for the lender, it does mean that everyone in the arrangement is liable for paying the mortgage if anything were to go wrong. In this scenario, if your daughter could no longer afford the monthly payments, you would have to cover them and could also face additional consequences, such as a negative impact on your credit score.
YOUR MORTGAGE IS SECURED ON YOUR HOME. THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.