Joint Mortgage Sole Proprietor Mortgages – 1st step onto the property ladder

Joint Mortgage Sole Proprietor Mortgage is fast-becoming one of the top strategies for becoming a first-time homeowner. With property prices shooting up, the economy tanking and more people feeling the effects of stagnant salary increases, this is one of the best options on the market. A JMSP mortgage has some advantages and some things you need to be wary of if you are looking to consider this as a serious option.

What is a joint borrower, sole proprietor mortgage?

A JMSP mortgage is quite simple. If you are an affluent parent and your child is seeking to get on the property ladder, you can use your income and combine it with their own, to be able to qualify for this kind of borrowing plan. The key is that you don’t take ownership of the property, so you don’t pay a hefty surcharge from the stamp duty. The benefit of this is, the parent pays a large portion of the mortgage, but as the child steps up in their career and begins to earn more, the parent slowly stops making the lion’s share of payments. This allows for parents to smoothly exit from a JMSP mortgage and also, give their child a greater sense of independence and ownership of their home.

How do Joint Borrower Sole Proprietor mortgage applications work?

It’s highly likely that a young person who is starting off on a base salary won’t be able to earn as much as their parents, and thus, not be able to afford a decent property. However, combining your parent’s salary with your own can lead to being given the green light for a JMSP plan. Let’s say the property you want to buy is £300,000 but your salary is £25,000. A mortgage that is over 10 times the level of earnings would be immediately rejected. However, combining the parent’s £90,000 salary, it equals £115,000 and thus, about 3 times the mortgage intended. As long as the total is between 5-3 times the mortgage, you will be fine. The parent doesn’t take ownership but makes the majority of payments for the time being and then gradually phases out as the child begins to pay more.

How many applicants will joint borrowers, sole proprietor mortgage lenders consider?

The maximum that will be allowed, is four. This is great for parents who have two children or perhaps would like to help at least two and get them onto the property ladder. The major concern for you is, what if the two children who now jointly own a property, which you are making the majority of payments for, don’t live up to their end of the deal? What happens if one leaves the country for their career? What if one of them loses their job? All four of you need to know what you want to do and what obligations you’re okay with before agreeing.

How many applicants will joint borrowers, sole proprietor mortgage lenders consider?

We are seeing more and more customers who want this kind of mortgage. It’s great because children get to own their first home. A joint mortgage is where the parent takes joint ownership of a property and thus, the child doesn’t feel as if it is their home. It’s also a legal untangling mission for when you wish to fully transfer ownership of a joint mortgage property, to your child.

A JMSP is great for an affluent family, with children who have great career prospects and are earning a decent or above-average salary.

Which lenders offer JBSP mortgages?

It’s a good idea to ask around, but some of the well-known names are Barclays, Metro Bank, Clydesdale, Natwest, and Halifax to name a few. You should ask any lender you feel can live up to the challenge as they are also taking risks.

Best JBSP rates

Lenders are willing to take up to 20% exposure risk for a JBSP plan. It all depends on the situation, earning potential of the children, and the wealth of the parents. Different banks and lenders will all have their own exposure rates and different interest rates on the mortgage.

Pros and cons of Joint Borrower Sole Proprietor mortgages

  • Obviously, being able to actually own the property outright for the first time, is a major source of pride for the children.
  • The parent can smoothly transition out of the plan as the earnings of the children grow.
  • There is no stamp duty to pay, which normally amounts to 3% of the property. On a property worth £300,000 this would be £9,000. So it’s a great money-saving opportunity.
  • The children will be given a home from which they can make a start in life. This helps them to chase their career and not worry about getting on the property ladder before it gets more expensive.

  • Clearly, the parent is taking the majority of the risk. Not only are you paying the most for the first few years, but you have no ownership of the property
  • If you were to fall out with your children, you could be left with a huge risk. You are liable to make payments on the property but have no control over it.
  • If a child stops making payments or earning a salary, the parent still has to pay their share of the mortgage and is effectively locked in.

Using a joint borrower, sole proprietor mortgage for protecting assets

If you own a business but it fails, you still have a ‘family’ property that is not actually owned by you. Thus, you can use your children to buy a property but not legally own it. You can also use the ‘second’ home to let but not pay any tax on the income that is brought in.

Speak to a joint borrower, sole proprietor mortgage expert before you apply

Always speak to a professional before committing. We can provide you with all the information you need. We’ll run you through the process, guide you through any dark alleys that might be lurking in any JBSP mortgage plan and also, give you a rounded education on the benefits and pitfalls.

We think that JBSP is the right product for this era as property prices are soaring and young people struggle to get onto the property ladder. Don’t hesitate to contact us when you’re ready to know more.

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