Everything you Need to Know about Joint Borrower, Sole Proprietorship Mortgages
Property prices went up by two-thirds between the years 2010 and 2020. In Greater London, they doubled. So why is it so hard right now, to buy a property? The average deposit going up to 20% was a huge problem for first-time buyers, and currently, houses are 11 times higher than average earnings. With all of these factors working against first-time buyers, it’s not at all surprising to see that first-time buyers are now turning to their parents in an attempt to get on the property ladder.
Disadvantages of Buying a Property with a Parent
You should know that there are some disadvantages to buying a property with a parent. One of them is stamp duty, which you will have to pay if your property purchase is over £125,000. First-time buyers do not have to pay for this, as long as the property they are buying is £300,000 or less. If your parents have a property, you’ll be paying second home tax. This is 3% of the property, over £40,000. Taking out a joint borrower mortgage, or a JBSP is another option. This is when you buy a home with the help of someone else. You’ll both have joint responsibility here, but you will own the property. If the property should increase in value, your parents will not have a legal claim.
Could a JBSP mortgage be Suited to You?
Even though these types of mortgages are more than suited to people who are trying to get on the property ladder for the first time, you do not have to be a first-time buyer if you want to take one out. Four people can take the mortgage together and as long as you are doing it with family, you should be fine. It should be noted that only the person who is the sole proprietor can live in the property. You will need to prove that you can meet the mortgage affordability terms. In a lot of cases, you will have to prove to the lender that you can afford the mortgage on your own, after a set period. if you do not have a clear career progression in your current job then this can be difficult to show. Many lenders will have to pay off their mortgage by the age of 75. Some lenders allow you to borrow up until the age of 85, and others do not have any kind of limit. If you are taking a mortgage with a parent then this can shorten the length of your potential term. The age of the oldest person who is borrowing, will be used to decide the mortgage term.
So in short, this kind of mortgage will put the parent on the mortgage but they will not be on the deed. This helps out a lot with affordability. If you want to proceed with this kind of mortgage then getting in touch with a mortgage advisor is the best thing that you can do.
