Joint Borrower Sole Proprietor Mortgage

The joint mortgage sole proprietor mortgage product is aimed at mortgage applicants who do not have the affordability to get a mortgage on their own but can do so with the help of a joint applicant. This means an applicant with a lower salary can get support from a family member, partner or friend to jointly apply for a mortgage, but they won't be a registered legal owner of the property.

The parties on the mortgage but no on the legal title take a huge risk as all parties to the mortgage are is jointly and severally liable for the mortgage. You may also have to pay additional stamp duty - Click to read the stamp duty implications for using the joint mortgage sole proprietor mortgage product. As there is such a high risk for the mortgage applicants all mortgage lenders require the parties on the mortgage and not on the title to receive independent legal advice from a solicitor.

In the article below we run through the independent legal advice process when getting a joint mortgage sole proprietor mortgage, confirm time-frames of how long the process takes, and explain some of the ways you can speed up the process.

Do you need independent legal advice for a joint borrower sole proprietor mortgage?

Our solicitor provides the following services for Joint Mortgage Sole Proprietor clients:

  • Independent legal advice - Face to Face or Skype calls to suit your circumstances
  • No Beneficial Interest Deed of Trust (required for HMRC for second home stamp duty provisions)
  • joint borrower sole proprietor mortgage lenders - Our solicitor can act for all mortgage lenders including Barclays Bank Plc (The Woolwich), Metro Bank Plc, Furness Building Society, Halifax Bank Plc, Market Harborough Building Society and HSBC Bank Plc

Our solicitor ensures you fully understand the implications of completing the transaction and how the mortgage product affects you. On instruction we will get in contact with your mortgage lender and give them the acting solicitor's details. You can call us now to discuss further on 0333 344 3234 (local call charges apply).

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Why is this product different to a joint mortgage, joint ownership?

With a joint mortgage, joint ownership both the applicants named in the mortgage offer are registered as legal owners of the property. With a joint borrower sole proprietor mortgage the applicant being used to support the salary multiples/affordability isn't a legal owner of the property (read about the Beneficial Owner Vs Legal Owner here).

As a non-legal owner it could mean you don't benefit from any gain in the property; whether it be rental income or an increase in the property's value.

There could also be challenges relating to getting the non-legal owner's name off the mortgage. As the legal owner is unlikely to be able to afford the mortgage repayments and/or application on their own, then the legal owner would be have to sell the property. If however they refuse to do this, then the non-legal owner could be faced with a lengthy and costly legal battle to force the sale which they may be unsuccessful in achieving if they don't have any equity in the property.

The non-legal owner could make a request to the mortgage lender for a deed of release, however, if the mortgage lender decides that the legal owners cannot afford the mortgage they can choose to decline this request.

Remember, if the non-legal owner owns another property then being on this joint mortgage may affect their ability in the future to refinance their own property.

Where the mortgage products don't differ is the joint applicants' obligation to the mortgage lender as they are jointly and severally liable for the mortgage repayments, regardless if you are a legal or non-legal owner.

What are the key things you need to do with a Joint Mortgage Sole Proprietor?

  • 1Organise your mortgage through bank/mortgage broker
There are a number of mortgage lenders offering a joint mortgage sole proprietor product including:
Correct as at the date of publication

  • Barclays Bank Plc (The Woolwich)
  • HSBC Bank Plc
  • Furness Building Society
  • Halifax Bank Plc
  • Metro Bank Plc
  • Market Harborough Building Society

Each of the mortgage lenders has a different approach to the application and what information they provide for the independent legal advice. We work regularly with all of the above mortgage lenders and can guide you through what you need to do.

  • 2Draft a deed of trust
A deed of trust is needed for the protection of both the legal and non-legal owner and to demonstrate the non-legal owner has zero beneficial interest in the property.

Protects the legal and non-legal owner

Within the deed of trust the legal owner and non-legal owner can set out their intentions for the arrangement such as what to do when either party wants to leave, what happens if you are unable to make mortgage repayments or who is liable should there be a breach to the terms of the deed of trust.

Evidence of zero beneficial interest

HMRC states: "Where an individual (who is not a spouse or civil partner of another purchaser) is one of the purchasers of a dwelling but they will have absolutely no beneficial interest in the property, they will not be treated as a joint purchaser of that dwelling. This would have to be evidenced in writing . Any future entitlement to capital proceeds from the sale of the property, to income or to occupy the property would mean that they do have a beneficial interest." .

A deed of trust can be drafted to evidence a joint borrower has no future entitlement to capital proceeds from the sale of the property, to income or to occupy the property. Without written evidence, and if in the future any of these benefits are evidenced by HMRC, the transaction could have the higher rate of stamp duty applied to it if the non-legal owner has an interest in another property.

We charge a fee of £240 (Incl VAT) for drafting a deed of trust between legal and non-legal owners for this type of arrangement.

  • 3Get independent legal advice for the mortgage
As part of the conditions of the mortgage offer the non-legal owner needs to speak to a legal adviser so that they can be made fully aware of their obligations under the mortgage. The legal advisers acts on behalf of the mortgage lender and is instructed to ensure they have provided independent advice to the non-legal in relation to the mortgage product. The meetings are normally face-to-face, although we provide this service utilising Skype.If you need independent legal advice in relation to a joint mortgage sole ownership mortgage product then call 0333 344 3234.

Your legal advisor will:

  • review all of the mortgage documentation and financial statements;
  • discuss the following with you in a face-to-face meeting:

  • the nature of the documents and the risk that you may lose your home if you both cannot meet the mortgage payments, and even the possibility that you could be made bankrupt;
  • the seriousness of the risks involved by reference to the purpose, amount and terms of the mortgage and whether you understand the value of the property being charged and if there are any other assets out of which repayment could be made if a problem occurs in relation to meeting the mortgage payments;
  • the fact that the lender may alter the terms of the loan including increasing the amount borrowed without reference to you;
  • whether you are content for the legal advisor to write to the bank confirming that they have explained the nature of the documents to you and the practical implications they may have;
  • whether you wish the legal advisor to negotiate with the bank on the terms of the transaction (e.g. limitation on the amount borrowed);
  • that you do have a choice on whether to sign and consent to mortgage with the decision being up to you alone; and
  • the legal advisor must make sure that you have not been pressured into this transaction in any way.

  • Draft and send an Etridge Letter to you summarising the discussion and asking you to sign and send back an acknowledgement. Once the legal advisor has this back from you, they can then:
  • Complete the mortgage certificate and supply it to the bank.

Although this exercise is a condition of the mortgage offer, the fees for the advice are payable by the mortgage applicants.

* Important: You must be on your own, with no one else in the room, for the full duration of time that the independent legal advice is being given via Skype.

  • 4Get a will
Both the legal and non-legal owners will need to get a will to set out their intentions in the event of their death. This is especially essential for the legal owner as the non-legal owner will need the executors of the will to sell the property in order to release them from their obligations under the mortgage. Until the property is sold, the non-legal owner will be liable for the mortgage repayments.

We can help you with drafting you wills and costs start from £180 INC VAT for a single will - call 0333 344 3234

How does the Independent Legal advice process work

  • You complete the mortgage application, book your mortgage valuation back and receive the mortgage offer subject to independent legal advice.
  • You provide our legal advisor’s details to your bank.
  • Your bank will instruct our legal advisor and send the following by post (takes 3 to 5 working days from mortgage offer).

  • The bank’s formal instruction to provide the ILA (remember that the bank instructs the legal advisor to provide the ILA);
  • Mortgage offer including any supplementary conditions;
  • The independent legal advice certificate form;
  • The mortgage terms and conditions for the specific mortgage product;
  • The supporting financial documents; and
  • The mortgage deed.

  • Our legal advisor reviews all the mortgage documents (this normally takes 2 to 3 working days after receipt)
  • You review all legal documents including the mortgage deed and terms and conditions (note down any questions you may have relating to the mortgage product) Our legal advisor organises a face to face meeting with you – it lasts approx. 1 hour.
  • After the meeting our legal advisor issues you an Etridge Letter confirming the advice that has been given (this takes around 2 days).
  • You sign the Etridge letter confirming you have received the legal advice and sends a scanned copy to our legal advisor. Our legal advisor signs the mortgage certificate and sends to your bank and/or conveyancer. 
  • The bank confirms if they are happy to proceed.

Examples of how a joint mortgage sole property ownership could be used:

  • A parent can be jointly on the mortgage but their child is the sole legal owner;
  • A friend can be jointly on the mortgage but their friend is the sole legal owner; or
  • A partner can be jointly on the mortgage but their partner is the sole legal owner.

Each circumstance is different and mortgage lenders will review each individual case separately. In every case, separate legal advice is required.

Frequently Asked Questions

How can the non-legal owner leave the mortgage?

a) If the non-legal owner does not have a deed of trust then they can leave the mortgage by:

  • Mutually agreeing with the legal owner to sell the property;
  • Getting a deed of release from the mortgage lender - this is reliant on the mortgage lender granting this, which they are unlikely to if the legal owner cannot afford the mortgage; or
  • Court order - the non-legal owner may struggle to get the court to give an order of sale if they do not own equity in the property.

b) If the non-legal owner has a deed of trust then there is a clause within the agreement that allows for the non-legal owner to give notice on the legal owner of their intention to leave. The legal owner has 10 days to agree to remortgage read how to remortgage your home and remove the non-legal owner, or to sell the property on the open market.

What happens if the legal owner stops paying the mortgage?

All the applicants on the mortgage are jointly and severally liable to repay the mortgage. If the legal owner does not pay the mortgage repayments then the non-legal owner will need to pay these.

What happens if the legal owner dies?

In the event of death, the executors of the legal owner take on the responsibility to handle the sale of the property. Until the property is sold, the non-legal owner is responsible for the settlement of all mortgage repayments.

What happens if the non-legal owner wants to get another mortgage on another property?

The non-legal owner needs to declare their obligations under this mortgage to any mortgage broker/mortgage lender when they look to get lending on another property. This may affect the non-legal owners affordability on another mortgage product.

What happens if I fall out with the legal owner?

If the non-legal owner falls out with the legal owner then the non-legal owner will have to follow the guidance under the FAQ "How can the non-legal owner leave the mortgage?"

Does the non-legal owner get any benefit from any gain in the property value?

Unless there is a deed of trust drafted that states the non-legal owner owns a beneficial interest in the property, then the non-legal owner does not benefit from any gain in the property as the legal owner owns 100% of the beneficial interest.

Does the non-legal owner have to pay the mortgage lender if the property loses value?

Yes. The non-legal owner is jointly and severally liable for the mortgage to be rapid in full and as such will be jointly liable to repay the mortgage if the property is sold with negative equity.

Does the non-legal owner have any occupier rights?

The mortgage lender doesn’t prevent the non-legal owner from occupying the property, however it is agreed that they may only occupy the property whilst the mortgage is being paid and the non-legal owner has to give up occupation to the mortgage lender if they needs to repossess.

The mortgage offer states, "It is understood that this transaction is to proceed on a borrower non-proprietor basis whereby 'The Owner' will alone be named on the title deeds to the property. In this regards should 'The Non-Legal Owner reside in the mortgaged property they will be required to complete the occupancy form prior to completion and drawdown of funds"

The occupancy form (which is signed and witnessed) states, "I understand that Mortgage Lender proposes to lend money on the security of the property AND I agree with Barclays that any right of occupation and share of interest in the property which I may now or later have is postponed to the rights of Barclays as the lender"

Do I need a deed of trust?

Yes. The non-legal owner should request the legal owner agrees to a deed of trust allowing for the protection it provides them. The legal owner will need to share some of the beneficial interest of the property to the non-legal owner and then a deed of trust can be registered as a restriction over the property.

Do you have to pay second home stamp duty if the non-legal owner owns another property at the time of completion?

You should always speak to HMRC to find out if you are liable to pay stamp duty in relation to your specific transaction.

An example from HMRC where the second home stamp duty isn't charged is as follows:

Mr and Mrs M are helping their son buy his first property by providing the deposit for a flat which will be his main residence. Mr and Mrs M currently own just one property, the family home. Due to the bank’s lending criteria they require Mrs and Mrs M to be a party to the mortgage and be on the deeds of the property. On the same day as the purchase a deed will be executed which will provide that Mr and Mrs M have no interest in the property and that their son has full beneficial interest in the property.

The higher rates will not apply because Condition C is not met.

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