How to Borrow More as a First Time Buyer with Joint Borrower, Sole Proprietor Mortgages: A Smart Alternative to Guarantor Loans

How to Borrow More as a First Time Buyer? Well, first, how does a Joint Borrower, Sole Proprietor (JBSP) Mortgage Work?

A Joint Borrower, Sole Proprietor (JBSP) mortgage allows up to four people, including family members or friends, to combine forces and buy a property together. The twist? Only one person takes ownership. Here’s why it’s gaining popularity and How to Borrow More as a First Time Buyer:

• Increased Borrowing Power: Pooling incomes from multiple applicants boosts your borrowing capacity. Perfect for those whose individual income might not qualify them for their desired loan amount.
• Helping Hands: Parents can assist their children without being named on the property title. The main applicant retains sole ownership while benefiting from financial support.
• Stamp Duty Savings: With only one person on the property deed, JBSP mortgages can save you money on Stamp Duty – as the sole proprietor can still benefit from their first time buyer stamp duty incentive.
• Flexibility: Parents can contribute varying amounts to mortgage payments. As the main borrower’s financial situation improves or they receive pay increases, they can potentially remortgage solely in their name. Alternatively, the mortgage can be kept as JBSP with a different mortgage lender or via a product transfer as an existing customer once the initial fixed rate product ends.
• Deposit: The minimum deposit amount required for a Joint Borrower, Sole Proprietor mortgage is currently, 10%.

Is a Joint Borrower, Sole Proprietor Mortgage right for you? Key Considerations:

• Affordability Calculations: Lenders will assess all applicants’ debts, credit commitments and regular expenditures, ensuring affordability for everyone involved. These include monthly payments on loans, credit cards, and other lines of credit. In addition, any monthly rent or mortgage payments, household expenses, and any other costs associated with living at a different property (if applicable).
• Joint Responsibility: When entering a JBSP mortgage, all applicants are collectively responsible for the mortgage repayments. It’s crucial to select individuals you trust for this shared financial obligation. If any of the applicants have existing residential mortgages and intend to remortgage, lenders will consider the full payment of the new JBSP mortgage as an ongoing financial commitment. This could potentially impact their ability to secure future mortgages or loans, as it may affect their borrowing capacity and the range of mortgage options available to them. In essence, the financial responsibility of a JBSP mortgage is not isolated and can influence each applicant’s creditworthiness in the eyes of lenders. Choose co-applicants wisely, as their financial decisions and commitments will intertwine with your own.
• Lending Policies: Research lenders with criteria matching your circumstances. Some may have specific requirements regarding relationships between borrowers or eligible property types.
• Exiting the Agreement: After the initial fixed rate product ends, the sole owner can switch to a mortgage in their name only, provided they meet affordability criteria.

Conclusion:

JBSP mortgages empower homebuyers by leveraging family or friends’ financial strength. While considerations exist, they’re a valuable tool in today’s market. Consult a mortgage advisor to align this option with your long-term financial goals. Speak with one of our expert mortgage advisers today!

Credit – Image by pch.vector on Freepik