Image showing a woman moving into a new home

4 June 2021

A unique solution for first time buyers – with long term help from mum and dad

Byline: Andrea Roberts, Key Account Manager at Principality Intermediaries

We’re seeing growing interest in Joint Borrower Sole Proprietor (JBSP) mortgages, and with good reason.

The acronym may not roll off the tongue, but there are more and more JBSPs coming to market, and they’re filling an important gap. 

As mortgage intermediaries, you’ll all be familiar with JBSPs by now: they allow borrowers to take out a mortgage with family members - usually parents or grandparents - who will take joint responsibility for the mortgage payments, but without sharing ownership of the property.

It’s little surprise that first time buyers are taking an interest, as it gets harder and harder for them to step onto the housing ladder. Average house prices in the UK increased by 8.5% over the year to December 2020, to a record high of £252,000, according to ONS stats. This has helped push affordability across the housing market to its worst for 10 years, according to analysis by London estate agency Benhams.

So, as a result, the average first time buyer is now 34 years old, an age which keeps on creeping higher – wind back to 2007 and the average first time homeowner was 28.

Amid all of this pressure, the ‘Bank of Mum and Dad’ remains crucial for many would-be buyers. Sometimes, though, not all of the ways of tapping into this source of cash work. A lump sum to help with a deposit, while helpful, won’t alleviate the ongoing monthly payments that some FTBs may struggle with. And Joint Mortgages aren’t always right either, as parents may need to pay second property stamp duty rates if they already own a home.

With a JBSP, on the other hand, as only the child is named on the property deeds, the parents (or grandparents) can avoid the stamp duty surcharge.

Also, with a JBSP, up to four applicants will be accepted using all four incomes for affordability. That’s certainly the case with our JBSP products, but not for all lenders.

Another advantage of our range of JBSPs is that your clients’ relatives can stay on the mortgage for the full term (with some other lenders’ products, after five years, the parents would need to be removed). Of course, there are instances when borrowers are ready for their relatives to come off the mortgage. This is why our JBSPs are all repayment only, so it becomes more feasible for borrowers to wean themselves off the ‘Bank of Mum and Dad’, as and when they are ready.

You’ll be pleased to know too, that our JBSPs only involve a simple online application, rather than multiple paper applications. You can do so on our slick new mortgage sales platform too [link to MSO blog], which makes the whole process much easier and quicker.

There are a couple of important features of JBSPs to make clear to clients. The buyers’ relatives, known as non-owning borrowers, must get independent legal advice. Also, we’re sometimes asked whether contributing parents can live in the property with their children, but this is not possible with a JBSP. There’s plenty more information for brokers about our JBSPs on our dedicated webpage.
It’s likely that JBSPs will become more and more popular, as parents and grandparents seek to help their kids get onto the property ladder. We hope it enables more first time buyers to achieve their home buying dream – with your help!

Find out more about our JBSP Mortgages Webpage


Published: 04/06/2021

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