Joint Borrower Sole Proprietor Mortgages

The majority of mortgages and house purchases these days, and for some years, have been legally set on a joint tenancy basis. This means that the names on the mortgages and its deeds must match the title deeds to the property. More recently, some lenders have been more flexible, and solicitors more innovative, in their approach with a growing trend of ‘Joint Borrower – Sole Proprietor’ (JB-SP), which can really help those seeking both residential and Buy to Let properties in certain circumstances. This type of arrangement was quite common in the 1950s and 1960s; so why is it making a comeback?

The implementation of the mortgage market review in 2014 and the mortgage credit directive in 2016 changed the way lenders assess predominantly residential mortgages; and the Prudential Regulation Authority (PRA) changes in 2017/18 affected Buy to Let mortgages in a similar way. Add to this the substantial increase in Stamp Duty for those owning more than one property at a time and further tax issues for this latter group and it becomes clear that there are certain scenarios where a Joint Borrower Sole Proprietor mortgage option can be a real winner.

The option allows the mortgage to be in joint names, but the home ownership to be in just one person’s name.

So, who could it help?

First time buyers can take out a mortgage jointly with their parents – provided all meet the lender’s criteria – allowing them to borrow more than they could if they were buying alone. If the title deeds had to be the same and the parents already owned their home, then the purchase would be subject to additional property Stamp Duty. If a JB-SP arrangement was used, they would benefit from only having to pay the first time buyer Stamp Duty rates, potentially savings thousands of pounds, or even tens of thousands.

Buy to Let landlords and landladies, who are couples, have traditionally taken mortgages in sole names of the partner who earns the least to offset tax. However, recent changes requiring minimum income on Buy to Lets often scuppers this plan now, even when refinancing. This arrangement will allow the higher earner’s income to be used on the joint mortgage whilst having the potential to keep the property in the lower earner’s name; opening up a wider market to them and almost certainly saving them money and hassle.

Some investors have a limited company to purchase their Buy to Let properties and some investors do not want to be ‘homeowners’ which would mean that the property had to be declared as an asset under HMRC rules in their tax returns. Joint Borrower Sole Proprietor mortgages could help these people too.

Euxton Mortgage Market can help with all types of mortgages, including Joint Borrower Sole Proprietor options. By looking at your current financial situation, we can advise on the mortgage type that will be best suited to you and your needs.

July 2018