Joint Borrower Sole Proprietor Mortgages
A Joint Borrower Sole Proprietor Mortgage is a type of mortgage where a sponsor, typically a parent or other close relative, uses their income to add to the applicant's borrowing power.
It is therefore an option for clients who are struggling to afford to buy the property they want on their current income but where they have a sponsor who is willing to help them. In most cases the lender will also allow the applicant to use a gifted deposit, again normally from a parent or close relative and this can even be from the sponsor themselves.
The sponsor needs to be a residential homeowner but they do not need to be an owner of the property along with the purchaser, they can simply be responsible for the mortgage.
This can have advantages in terms of stamp duty. Typically where anyone involved in a property purchase already owns a house they have to pay enhanced stamp duty but in this case if they do not become an owner of the property they can still help their child to buy the property but can avoid having to pay the enhanced stamp duty which is currently an additional 3%.
In most cases a charge will not be placed on the sponsor's property but it can be at risk if payments are not made on the new property that is being purchased. Also, sponsors and purchasers are jointly liable to ensure that the mortgage payments are met.
A sponsor can be removed from the arrangement in future if it can be shown that the applicant can now afford the mortgage in their own right.
A full affordability assessment will be undertaken on both applicants and sponsors and the term of the mortgage can be limited by the sponsors age.
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