Ashley Pearson, Head of Intermediaries at Loughborough Building Society
Joint Borrower Sole Proprietor (JBSP) mortgages are often associated with first-time buyers (FTBs) struggling to get a foot onto the property ladder. Yet, the truth is that these products can actually help all types of borrowers looking to buy a home.
This is particularly true in the current economic environment, where higher interest rates and increased living costs are causing a growing number of borrowers to fall short of meeting mainstream affordability requirements.
JBSP mortgages work by combining the incomes of up to four family members, which can significantly help boost the borrowing potential of many customers who may otherwise be unable to purchase a property on their own. While in most cases, the additional family members are often considered to be parents supporting their FTB children, JBSP mortgages can be used in various situations. Other close familial relationships, such as brothers, sisters, and stepparents, can also be considered on applications.
Although all supporting borrowers are named on the mortgage deeds, they have no legal ownership of the property itself. This also means they have no potential stamp duty surcharge liability, as they are only named on the mortgage to maximise borrowing power.
Over the last few months, we’ve seen increased demand for this type of product among second-time buyers and borrowers facing a change in circumstances, such as those going through a divorce or relationship breakdown.
In each of these cases, the applicants were struggling to meet affordability requirements to buy out their partner at the remortgage stage. This resulted in the applicant having to enlist the help of their parents or siblings to increase their purchasing power to get the deal over the line.
As a lender, we were able to help these borrowers find a solution, as our lending criteria means we will consider JBSP applications from borrowers looking to do a transfer of ownership and buy out their partner with a family member stepping in as a supporting borrower at up to 90% LTV.
A JBSP mortgage can also be used in many other situations, such as when an applicant may be looking to make home improvements. In this situation, applications from borrowers will be considered with support from a family member at up to 95% LTV.
With an increasing number of people taking their mortgages into and past the traditional age of retirement, there’s also the option for borrowers to consider a reverse JBSP, which enables children or grandchildren to help their parents or grandparents struggling to meet affordability.
This can prove particularly useful in cases where Mum and Dad are on an interest-only mortgage which is coming to the end of the term and need to remortgage onto another deal.
By adding their son or daughter onto the mortgage as a JBSP, the parents may be able to secure borrowing at up to a maximum of 60% LTV and can take the mortgage past the age of 80.
In all JBSP mortgage borrowing cases, a maximum of four borrowers are allowed per application, which equates to two owner-occupiers and two supporting borrowers. Joint borrowers cannot reside in the property, and all applications are credit checked, not credit scored. The owner-occupier must be employed, self-employed, or in receipt of a pension income. They must also be able to cover a minimum of 25% of the loan based on income multiple, which is calculated at up to 4.5 times all incomes before retirement.
Applying for a JBSP mortgage is a straightforward process that opens up enormous potential for all borrowers facing affordability challenges in the current economic climate, not just FTBs. Brokers with clients struggling to meet affordability at the remortgage stage or going through a meaningful change in financial circumstances would be wise to explore JBSP as a possible borrowing option to help their clients secure the financing they need in what remains a challenging mortgage market.