Changing family circumstances in the event of separation or divorce
In the event of a relationship split one of the biggest stresses is working out how to remain in the family home to reduce upheaval and unnecessary changes. In this scenario a lesser known mortgage product, Joint borrower sole proprietor, not very catchy perhaps, but it offers a flexible solution to help home owners to split, share assets and keep the continuity of the family environment.
Recently an established client contacted us regarding a mortgage they had obtained jointly with their partner around 18 months previously. Unfortunately, the marriage had broken down and the couple separated but my client wanted to remain in the property with her children.
The problem was that whilst she could afford the mortgage payments on her income she couldn’t quite meet the lender affordability requirements due to the childcare costs as a single applicant.
On her income alone the borrowing criteria fell short by around £20k. However, after having a conversation with her dad, fortunately he was in a position to be able to assist.
Outcome
With the additional income secured by her Dad and the favourable terms secured for the Joint Borrower Sole Proprietor (JBSP) mortgage, including a competitive interest rate and a suitable repayment period, the client found herself in a more advantageous financial situation. Additionally, childcare costs, which previously posed a significant obstacle to her budget, were alleviated as her children transitioned into school. This transition reduced her outgoings on childcare, improving her financial position. As a result, she was able to cover the mortgage payments based on her own income.
This type of mortgage is becoming more common, lender affordability stress tests can be quite tight on one income, Joint Borrower Sole Proprietor helps to boost the affordability. First time buyers, young professionals and couples divorcing can especially benefit from this scheme, some lenders will even allow up to 4 borrowers per application.
Joint Borrower Sole Proprietor or Guarantor mortgage, what’s the difference?
The main difference between a guarantor mortgage and a joint borrower sole proprietor arrangement lies in the level of responsibility and legal claim to the property. In a joint borrower sole proprietor scenario, an individual can apply for a mortgage with another person who is willing to take joint responsibility for making mortgage payments, even though they don’t have a legal claim to the property. Essentially, both individuals are equally responsible for repaying the loan.
On the other hand, a guarantor mortgage operates differently. In this arrangement, a guarantor is involved who agrees to become liable for the debt only if the mortgage applicant fails to make the payments entirely. The guarantor’s responsibility kicks in as a backup if the primary applicant defaults on the mortgage.
Therefore, while both options involve additional parties in the mortgage application, a joint borrower sole proprietor agreement grants equal responsibility to both parties, while a guarantor mortgage involves a person who becomes liable for the debt only in case of default by the primary applicant.
What are the disadvantages of a Joint Borrower Sole Proprietor mortgage?
Disadvantages. Some credit risk to all borrowers: even though your joint borrowers don’t have any rights to the property, they’ll be equally affected by any defaults, missed payments or any penalties incurred. This could of course impact family relationships. Not everyone on the mortgage has ownership.
If I help my son/daughter with a JBSP mortgage, do I have to pay a second charge stamp duty?
The person that is supporting the purchase won’t have to pay the 3% second charge stamp duty fee when helping their son/daughter buy a property with a JBSP mortgage because they hold no legal ownership over the property.
Who pays joint borrower sole proprietor mortgage stamp duty?
With a sole proprietor joint mortgage, the stamp duty is usually only paid by the proprietor. The proprietor is the person that will own the property.
What is the maximum age for joint borrower sole proprietor?
For both applicants (including the non-owner borrower), the maximum age at the end of the term is 80.
First-time buyer schemes such as the Government’s Help to Buy programme restrict people to only buying new builds whereas a person buying a home with finance from a JBSP mortgage can buy an older home, which could be cheaper in some circumstances.
With such a bespoke mortgage that is only dealt with by certain lenders, speaking to an adviser that works with many lenders is imperative for this sort of application.
We work with the whole of the market and have the experience and expertise to guide you through the process of securing the right option for your circumstances.
Call, or drop us a message for an initial chat to discuss your needs.
