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Tembo's guide to JBSP mortgages.


With property prices soaring, a joint borrower sole proprietor mortgage is a way for families to help often younger people who are still early on in their careers and on lower salaries, to buy a home.

That is why a JBSP is the product that powers the Income Boost product at Tembo.

Never heard of a JBSP mortgage? No problem, they are still pretty under the radar – but you’re about to find out all you need to know. It may be able to help you and your loved ones.

In this guide we will explain:

  • What is a joint borrower sole proprietor mortgage?
  • How does a JBSP mortgage work?
  • Who can it help?
  • What are the pros and cons? – what are the risks for the booster/buyer?
  • What’s the qualification criteria?
  • Commonly asked questions:

    When would an income booster come off the mortgage?
    What happens if the income booster dies?
    What is the maximum age limit?
    Can the person live with me in the property who is joint borrower?
    Which lenders offer JBSP?
    Alternatives to JBSP?

    What is a joint borrower sole proprietor mortgage? 


    A joint borrower sole proprietor mortgage is where:

  • two (or more) borrowers use their joint income figures to apply for a mortgage
  • only one will own the property (the ‘proprietor’)
  • both are legally responsible for making sure the mortgage is paid
  •  To put it another way, a joint borrower sole proprietor mortgage, or JBSP, solves the problem of someone trying to buy a home with a lower salary.

    A close friend or loved one gives them an income boost by adding their earnings figure to the mortgage application too. This gives a higher overall income figure.

    A higher income makes lenders more willing to agree to loan the amount needed for the home purchase (and reduces the amount of deposit required).

    That is the idea behind the Income Boost mortgage at Tembo.

    How does a JBSP mortgage work?


    A JBSP works by loved ones combining forces to boost the income of the person trying to buy a home.

    That’s how the Tembo Income Boost mortgage (which is powered by a JBSP) gets its name.

    Everyone on the mortgage application (not just the person trying to buy a home) agrees with the mortgage lender that:

  •   it can take their income into account when deciding how big a mortgage to offer
  • they all share the responsibility to pay the mortgage if the homeowner can’t
  • Let’s meet Hannah.

    In her mid-twenties trying to buy a home, Hannah earns £25,000 a year. Multiplying her earnings by 4 (a common sum used by lenders to work out how much they are willing to lend for a mortgage) gives Hannah £100,000 to buy a home.

    With the average UK house price now around £230,00, without a very large deposit Hannah won’t be able to buy a property.

    How can a JBSP mortgage help Hannah?

    With a JBSP mortgage a parent or grandparent, for example, can add their income into the mix to increase the amount Hannah can borrow.

    So if we take Hannah’s £25,000 income, and add to it her mum’s income of £38,000, that gives Hannah a total income (after the ‘boost’) of £63,000.

    £63,000 x 4 (in the typical way lenders do for mortgages) = £252,000

    That’s £152,000 more than on her own

    With a deposit of £20,000 to £30,000, Hannah is in a much better position to grab her dream home with a JBSP mortgage.

    Who owns the property with a JBSP mortgage?


    The borrowers apply jointly for a mortgage, but only one is registered as the legal owner of the property on the title deeds. Only the legal owner named on the property deeds has a right to ‘gain’ from the property. This means any rental income if the property is let out, or any share of the value of the property at all.

    Who can a JBSP mortgage help?


    Homebuyers

    JBSP mortgages can help borrowers who may otherwise be able to afford a larger mortgage, but who don’t currently earn enough to borrow what they need to buy a home. They can also help borrowers who need help making mortgage repayments temporarily until they can afford them alone and switch to a mortgage in just their name.

    This may include:

  • children or grandchildren just starting out on their careers with smaller salaries
  • women working fewer hours on lower earnings due to caring responsibilities
  • a growing family who needs a bigger home out of their price range
  • someone with no credit history or a low credit score
  • Homeboosters

    JBSP mortgages can also offer a better solution for family members who want to help their loved ones but who don’t have thousands of pounds to hand over to support a larger deposit. Tembo calls them ‘homeboosters’, because with a JBSP mortgage they are helping to boost their loved one’s income and get them into their dream home. Helping a homebuyer using a JBSP mortgage means the homebooster doesn’t need to liquidate any assets.

    What are the pros and cons?


    Pros 

    Avoiding stamp duty and capital gains tax

    A JBSP mortgage can be a good alternative to a typical joint mortgage.

  • In both cases all parties are equally responsible for repaying the mortgage.
  • But with a JBSP mortgage, because only the homeowner has their name on the property deeds, only they benefit from its value
  • So the other parties don’t usually have to pay capital gains tax or the 3% stamp duty surcharge
  • Cheaper mortgage deals

    Joint borrower sole proprietor mortgages are an alternative to the homebuyer taking out a 95% mortgage in some cases.

  • High loan to value (LTV) mortgages come with higher interest rates attached, because the lender is taking on more of the risk.
  • This can make the monthly repayments more expensive.
  • JBSP mortgages can help the homebuyer borrow more but keep the LTV lower.
  • This can unlock cheaper deals, and make repayments more manageable.
  • Smaller deposit (so get on the housing ladder quicker)

    Having a higher income, boosted by a loved one with a JBSP product like a Tembo Income Booster mortgage, may mean the homebuyer can achieve their homebuying dream with a smaller deposit. This can mean they are able to buy a property sooner, potentially savings thousands of pounds in rent. For example Moneyfacts calculated:

    Average rental payment = £951 per month

    Average repayment on a five-year fixed rate 90% LTV mortgage at 2.59% =  £233 less.

    Over the five-year term saving = more than £13,000

    Cons

    Credit check

    All borrowers on the mortgage application will need to pass a credit check. Even if a parent is a higher earner and wants to help boost the income of their son or daughter to help them on the property ladder, if they are overcommitted with their own borrowings and outgoings – maybe their own mortgage is still big, or they have a lot of credit card debt – that will be a problem.

    Credit risk

    It is important to remember all those named on a JBSP mortgage application are ‘jointly and severally liable’ for the monthly mortgage repayments. If your child misses a payment, the lender will come to you to make up the shortfall. If no one pays the monthly mortgage payments, this will affect the credit history of all those named on the mortgage application. Ultimately the worst-case scenario is repossession.

    Ownership

    All of those named on the mortgage application will be liable for repaying the mortgage, but only the homeowner has any rights to the value in the property. So parents (or grandparents) who put their income at risk in this way will have no corresponding rights.

    What’s the qualification criteria?


    Different lenders will take their own approach to a JBSP (which is why is it very helpful to use a mortgage broker). Some common criteria are:

  • JBSP mortgages are particularly useful for first time buyers, but also for remortgaging
  • Some lenders will consider a JBSP involving up to 4 people
  • All (or most of) of the applicants may need to be family members
  • Only the homeowner can live in the property
  • You don’t need a specific JBSP product, it can be put on any mortgage deal
  • If you’re eligible, JBSP mortgages can lend up to 95% of the value of the property
  • If the main applicant isn’t the only one making the monthly repayments, a lender may want them to detail how they will be able to afford the repayments in future
  • The length of the mortgage term will depend on the age of the oldest borrower
  • Everyone planning to be on the mortgage application must take independent legal advice before signing
  • Commonly asked questions


    When would an income booster come off the mortgage?

  • If the homebuyer’s salary increased such that they were able to guarantee the mortgage and afford the monthly repayments on their own
  • if the homebuyer agreed to sell
  • If the relationship with the income booster broke down and they could get a deed of release from the lender, unlikely to if the homeowner cannot afford the mortgage
  • What happens if the income booster dies?

     If the homebuyer can’t afford the mortgage repayments on their own they may have to sell the property.

    What is the maximum age limit?

     The length of mortgage term the homeowner is allowed will depend on the age of the oldest person named on the application. Most lenders require a mortgage to be paid off by age 75. This may limit your term if your income boost is coming from a parent or grandparent, and so make monthly repayments higher.

     Can the person live with me in the property who is joint borrower?

     No. Only the homeowner can live at the property.

     Which lenders offer JBSP?

     Many highstreet names offer joint borrower sole proprietor mortgages, including:

    Virgin Money

    Nationwide

    Bluestone

    Clydesdale Bank

    Post Office Money

     

    Under specific conditions:

    Norton Home Loans

    Dudley Building Society

    Skipton Building Society

    Melton Building Society

    This list of lenders is non-exhaustive and could change at any time. Each lender will have its own criteria and restrictions on who it will lend to using a JBSP mortgage, and within which rules. For the most up-to-date information, and to see all of your options, it’s a good idea to speak to a specialist mortgage broker.

    Alternatives to JBSP

     95% mortgages

     You can borrow as much as possible with a 95% loan to value mortgage. The trouble with this approach is:

  • Banks see that as a risky bet so apply their highest interest rates making repayments more expensive
  • You only own 5% of your property ─ if house prices fall by that much soon after you buy, you could find yourself in negative equity, where your home is worth less than you paid for it, a problem if your property value is still lower when you come to sell.
  • Guarantor mortgage

    Guarantor mortgages work by a loved one, often a parent, guaranteeing the homebuyer’s mortgage repayments. They put up their own home or ringfenced savings as security, known as ‘collateral’. If the homebuyer is unable to pay their mortgage, the lender has a legal right to pursue the guarantor for the money.

    Guarantor mortgages are often used by people with a very small (5%) deposit. Because the guarantor is covering some of the risk for the bank they are more willing to lend on a 95% basis.

    Some guarantor mortgages offer an incentive to whoever is putting up the security, by paying interest on savings ringfenced as collateral, paid at the end of the fixed guarantor mortgage term as long as the borrower has made all the necessary repayments.

     Asking for help with a deposit

     Going from a 5% deposit to a 10% deposit can really open up more (and cheaper) mortgage options for borrowers. Many more lenders are willing to lend and for less at 90% LTV. This is where the so-called Bank of Mum and Dad can come in.

  • More than half of first-time buyers under the age of 35 received financial support from BoMaD in 2020
  • That equates to more than 73,000 properties being supported by loved ones
  • On average BoMad contributes £19,000
  • 21% of respondents under 35 received more than £30,000
  • That’s £1.36 billion in BoMaD contributions in 2020
  • Helping loved ones purchase £18.11 billion of property
  •  

    If your parents would prefer to contribute to your deposit, Tembo can also advise on a Deposit Boost mortgage. This unlocks money from your family member's existing property and uses that cash to either top up your deposit or create one from scratch.

    Conclusion


    Joint borrower sole proprietor mortgages can work out a cheaper and more convenient option for parents or grandparents trying to help sons, daughters and grandchildren onto the housing ladder.

    Moving out of a rental property and into their own home sooner using a JBSP mortgage can save the homebuyer thousands of pounds.

    All financial products come with risks. It’s important to weigh up the pros and cons for your individual circumstances using an independent mortgage broker.

    Words by Laura Miller