I recently attended the London Mortgage Business Expo, and while sitting in on some of the seminars and walking around chatting to brokers, it surprised me how little awareness there seemed to be around Joint Borrower Sole Proprietor (JBSP) mortgages.
With affordability still a major obstacle for many buyers, JBSP mortgages offer a potential solution, especially for first-time buyers (FTBs), or anyone struggling to meet affordability on their own.
Yet, they don’t seem to have caught the attention of many brokers just yet.
By allowing up to four people – including non-family members – on the mortgage application, all four incomes can be taken into account when assessing affordability.
All named applicants will take responsibility for the mortgage payments yet only one person will be the legal owner of the property – the sole proprietor.
This option is especially popular among parents who want to help their children onto the housing ladder.
Right now, we’re seeing somewhat of a generational wealth divide in the housing market.
Parents may be nearing the end of their mortgage term, or have already paid it off, yet still be working and want to help their children get on the property ladder, but unsure of the best way to do so.
While the Bank of Mum and Dad can help with a gifted deposit, sometimes that’s still not enough to help with affordability, which is where a JBSP – or an income booster as we sometimes refer to it – can help.
I think part of the lack of awareness about this type of mortgage comes from the perception that JBSP mortgages are overcomplicated.
While it’s true that these types of mortgages can involve a number of moving parts, the end result is definitely worth it.
In the right circumstances, they can provide a solution for a wide range of borrowers and situations.
Helping FTBs
A common scenario, and one where we’ve been able to help in the past, is when a child goes to university and the parents wish to help them buy in the local area, instead of paying rent.
In one such scenario, we were able to help an applicant who wanted to purchase a new residential property near the university where they were studying to become a doctor. The individual had no personal income of their own but their parents were still working. The oldest parent was 52 and employed as a receptionist and planned to work until they retired at 75.
We were able to offer a 23-year term mortgage based on the parents’ employment income, facilitating a 90% (loan-to-value) LTV mortgage.
Given the eldest applicant was employed in a non-manual role, we were able to offer the term up to their retirement age.
It’s not uncommon for older borrowers to have complex incomes.
As well as their main income, there might be private and state pensions to consider, savings, and property to take into account.
JBSP mortgages can be applied across all sorts of lending scenarios for residential and buy-to-let (BTL) applicants, with options for split terms, interest-only, and transferring the mortgage to the main legal owner further down the line.
While in this scenario the joint borrowers were parents, non-family members can also be considered, with gifted deposits also accepted.
Demand from expats
In the right circumstances, UK-based parents can be named on a JBSP mortgage, and expats can also use it to help their children onto the property ladder.
Or vice versa – a child based overseas might help their UK-based parents with affordability by including their income on the mortgage application.
This could allow the parents to pay off their mortgage before retirement or assist with mortgage payments if they are facing a temporary financial setback.
Whether it’s a BTL or residential property, the same principles of a JBSP mortgage apply for expats as they do for those based in the UK.
This option can be particularly appealing to expats, as it allows them to help their relatives – or friends – back in the UK without being named on the property’s deeds themselves.
By working closely with brokers, our underwriters can take a personalised approach to the application and consider foreign income, multiple income sources, and complex incomes.
As brokers increasingly look for solutions to boost borrowers’ income, a JBSP mortgage could provide the answer.
Rob Oliver is director of distribution at Dudley Building Society
