Joint Borrower Sole Proprietor Mortgage. JBSP Mortgage & ILA through SAM Conveyancing
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Joint Borrower Sole Proprietor Mortgage

10 min read
Mortgages are offered to borrowers based on their income. The smaller your income, the less you will be able to borrow.

The joint mortgage sole proprietor mortgage product is aimed at mortgage applicants who cannot afford the full 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. The second borrower takes on liability for the mortgage, but won't be a registered legal owner of the property.

This type of mortgage is different to a normal mortgage because:

  • All parties, whether legal owners or not, are equally liable to repay the full mortgage debt;
  • All parties, whether legal owners or not, are bound by the terms of the mortgage;
  • Second home stamp duty could be payable if the parties don't make a Declaration of No Beneficial Interest; and
  • The non-legal owners don't have rights to sell, use or transfer their names from the legal title.

The main reason the JBSP mortgage is used so often is for two reasons:

    Avoid Second Home Stamp Duty - the most common reason for using this product. 
    Parents who own a house can help their children buy a home without incurring the additional rate of SDLT. 
    Similar for unmarried couples buying together. Married couples rarely use a JMSP mortgage because it doesn't matter if on or off the legal title, if either husband or wife owns an interest in another property then they have to pay second home stamp duty.
    Allowing the buyer to be the legal owner - similar to the reason for guaranteeing the property, the objective of a parent is to help their son or daughter buy a home. 
    With this mortgage they can do that without needing to have their name on the legal title which gives a feeling of ownership for their children.

Joint borrower sole proprietor mortgage lenders

Here is the list of mortgage lenders offering a JBSP mortgage product:

Joint Mortgage Sole Proprietor Process

  • 1Get a mortgage offer
There are a number of mortgage lenders offering a joint mortgage sole proprietor product. 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 declaration of no beneficial interest
A declaration of no beneficial interest, such as a deed of trust, is needed for the protection of the parties on the mortgage but not on the legal title 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 - 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.

  • 3Get Independent legal advice
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 owners in relation to the JBSP mortgage product.

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Your solicitor 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.
    Complete the mortgage certificate and supply it to the bank.

* 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.

  • 4Conveyancing Process
The conveyancing process is the same as a normal purchase. Here are a few scenarios where this type of mortgage product is 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

    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.

    If the non-legal owner has a deed of trust
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 a pre-agreed amount of days to agree to remortgage and remove the non-legal owner, or to sell the property on the open market.
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.
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.
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.
The main reason this type of mortgage is used is to allow someone to help the affordability of a mortgage application, who has another interest in property and wants to avoid having to pay second home stamp duty. Whilst you can't have an interest in land and avoid second home stamp duty, you can have a loan.
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"
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.

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.
An example where joint mortgage sole proprietor stamp duty for second homes isn't charged is as follows:

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.

* Subject to availability. If we are fully booked ask and we will see if we can fit you in sooner.
** We can act for all mortgage lenders, however some lenders such as Fleet Mortgages do not allow ILA by video conference. To avoid delays check with your lender or ask us if we can complete via video conference.
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