Joint Borrower Sole Proprietor Mortgages For The
Self-Employed

A JBSP mortgage can make it easier to buy the property you want if you're self-employed. Read on to find out more...

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Graham Cox - Founder & Cemap Mortgage Advisor | SelfEmployedMortgageHub.com
Graham Cox
Director & CeMAP Mortgage Advisor

A joint borrower sole proprietor (JBSP) mortgage is a great way for self-employed applicants to get on the housing ladder. With the financial support of family members, not only is it easier to secure a mortgage, but you can borrow more as well.

In this guide we'll explain what a JBSP mortgage is, how it works, typical use cases, the advantages and disadvantages and much more besides.

What is a Joint Borrower Sole Proprietor Mortgage?

With a JSPB mortgage, or a Joint Borrower Sole Owner (JBSO) mortgage as it's sometimes referred to, you take out a mortgage with one or more close family members. Your parents, for example.

Whilst each applicant is jointly responsible for the mortgage payments, only you own the property. The other borrowers have no legal claim over it.

Liability for payments

Because it's a joint mortgage, if a fall in your self-employed income meant you were unable to contribute to the monthly payment, the other borrowers would be individually liable to make good the shortfall.  

Just like how each spouse in a marriage is jointly and severally liable for the mortgage payment.

In most cases, only the proprietors can reside in the purchase property, not the other joint borrowers.

Do I need to be a first-time buyer to get a JBSP mortgage?

No, not at all. Whilst JBSP mortgages are commonly used by first-time buyers to purchase a home, it's not usually a lender requirement. Having said that, a few providers restrict JBSP to first-time buyers only.

What use cases are there for a JBSP mortgage?

There are a few typical use cases...

  • First-time buyers who don't have sufficient income themselves to purchase a home.
  • Older borrowers who no longer have the financial means to continue paying the mortgage on their home
  • Buying out a partner or spouse from the family home
  • Buying a residential or BTL property with the help of a sibling or other close relative.

Who can apply as the joint borrowers with me?

With such a high degree of trust and commitment required, it's common for family members to be named as additional borrowers.

Some lenders only allow parents, but others are more flexible and also allow applications with siblings, aunts and uncles, nieces, nephews and other close relatives .

A tiny number of niche mortgage providers allow friends to be named as joint borrowers.

Whoever joins you on the mortgage, it's recommended that all borrowers get independent legal advice before applying.  Some banks and building societies make it a mandatory requirement before they'll lend.

Can a couple get a joint borrower sole proprietor mortgage?

Yes. The Sole Proprietor part is a bit of a misnomer, as some lenders will allow 2 proprietors and two additional borrowers on the mortgage.

For married couples and partners struggling to borrow enough to buy their first property, a JBSO mortgage can be a great option.

How many incomes can be used for a JBSP mortgage?

Whilst it's possible for the income of up to four applicants to be used for affordability assessment, most banks and building societies only consider two or three.  

For example, a young married couple and a parent could apply, with the two highest incomes, or possibly all three, being considered for affordability.

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What are the benefits of a JBSP Mortgage for a self-employed applicant?

The most obvious benefit of a JBSP mortgage is that it makes it easier to get a mortgage.

If you're self-employed but can't borrow enough by yourself to buy the property you want, a JBSP mortgage can be an ideal solution. Especially if you expect your business earnings to increase over time.

Borrowing more with a JSBP mortgage

As an example, let's say that in your latest year's trading, your combined salary and net profit are £40,000.  

The maximum you could borrow, subject to deposit, affordability and credit checks, is £180,000. That's based on the standard self-employed loan to income (LTI) multiple of 4.5 earnings.

However, let's say that your dad, who earns £55000 a year, is happy to become a joint borrower on the mortgage. Now, with a £95000 combined annual income, you could potentially borrow £427500. Over twice as much.

A stable second income provides additional security to the lender, particularly if the family member has a decent level of savings they can fall back on.

Protecting your home from repossession

When you take out a small business loan, creditors often ask for a personal guarantee. That's because, as the name suggests, a limited company director has limited liability for the business's debts.

The personal guarantee acts as a backstop. If your business runs into financial difficulties, you become personally liable for any debts it can't service.

If you're unable to pay, you could end up insolvent and be forced into bankruptcy or an individual voluntary arrangement (IVA). This means creditors can seize and sell your personal assets, potentially putting your home at risk.

A JBSO mortgage prevents that nightmare scenario, by placing the ownership of the property in your spouse or partner's name.  You can of course, still contribute to, or pay in full, the monthly mortgage payment.  But with no legal claim, creditors wouldn't be able to seek a repossession order on the property.

Save on stamp duty (SDLT)

First-time buyers pay no stamp duty land tax (SDLT) on the first £300,000 of the property value.

If only one partner in a relationship is a first-time buyer, she or he can still take advantage of the £300,000 stamp duty threshold by making the other partner a borrower, but not a proprietor.

The saved stamp duty can be used to put down a larger deposit or to pay for the other costs of buying a home. For example, solicitor fees, home surveys and moving costs.

Peace of mind if your income falls

The last advantage is perhaps the most important, particularly for self-employed applicants.  Peace of mind.  

Knowing you have one or more additional borrowers to help with payments can provide that extra sense of security when times get tough.

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What are the disadvantages of a JBSP mortgage?

A JBSP mortgage certainly isn't something to enter into lightly. And like most things in life, it has its pros and cons.  Here are the most common potential disadvantages to keep in mind:

The financial commitment for your family members

All parties need to consider if they could afford the monthly mortgage payment if the other borrowers got into financial difficulty.

What if the worst happened and they passed away? Or became ill or seriously injured and and were unable to work?

Would you still be able to pay the mortgage for a few months, or even a year or two?

Of course, protection policies like life insurance, critical illness cover and income protection can mitigate those concerns. Still, asking a close family member to commit to a mortgage on your behalf is a big ask and important to consider.

Relationship trust

With the above in mind, you need to be absolutely sure you can rely on the other applicants, and they on you.  Trust on all sides is vital as any breakdown in the relationship could cause payments to stop.

In the worst-case scenario, your property could be repossessed. So it's crucial all applicants are aware of what they're signing up to.

Tax and legal implications

All applicants should consider getting independent professional advice about the tax and legal implications of applying for a JBSO mortgage.

This may mean talking to both a property tax advisor and a solicitor, which of course adds to the overall cost for all participants.

Age restrictions

For a residential mortgage, the eldest applicant's earned income is generally only considered until they reach their 70th birthday.

Beyond that age, affordability is assessed on pension or retirement income.

This can be problematic for mortgage affordability. For example, if your relative is 60, the mortgage term may need to be restricted to between 9 and 14 years, unless they can prove their pension income will be sufficient

That said, one or two providers will use earned income up to age 75 if the applicant works in a role that can realistically be extended beyond 70.

Someone who works in a professional or office based role, rather than in construction for example.

Are JBSP mortgages widely available?

Yes. Many providers, including some mainstream lenders, are happy to accept JBSP mortgage applications. Some have dedicated JBSP mortgage products, others make their standard product range available.

What additional stipulations are there for JBSP mortgages?

Many banks and building societies make various stipulations when taking out a Joint Borrower Sole Proprietor mortgage.

You may be required to comply with some or all of the following:

  1. To seek separate and independent legal advice.  Mortgage providers often ask for written evidence of the advice provided.
  2. To sign the mortgage deed in front of your solicitor on a face-to-face basis.
  3. If one of the borrowers wants to be released from the mortgage, consent is only granted by the lender if the mortgage is affordable by the remaining parties. You are likely to have to pay all legal costs.

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How do I get a JBSP mortgage if I'm self-employed?

If you've discussed a Joint Borrower Sole Proprietor mortgage with your family and feel it could be a good option, the next step is to have a quick chat with an advisor at SEMH.

With specialist knowledge of the mortgage market for directors, sole traders and contractors, and access to a huge panel of mainstream and niche JBSP lenders, we can quickly source the right mortgage deal for your circumstances.

Call 0117 205 1695 Monday to Friday 9am - 5pm to get the ball rolling. Alternatively, simply complete our 2 minute quiz here and we'll get in touch asap to discuss your JBSP mortgage options.

Faqs

Get answers to your most common questions below...
Can I add a new partner to join me on the JBSP mortgage?
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If you meet someone and want them to join you on the mortgage, you may need to transfer them to the JBSP instead of, or in addition to family members.

The mortgage provider's JBSP lending criteria will determine which options are available.

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Can a supporting borrower on a JBSP mortgage reside in the property?
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Yes, a few lenders allow this.

Where they do, the supporting borrower may be asked to sign an occupiers Consent form. By doing so, the occupant, who has no legal claim over the property, waives their right to stop the lender from remedying a breach of the mortgage terms and conditions.  Eg non-payment.

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Graham Cox

About the author

Graham Cox is the founder of Self Employed Mortgage Hub, the trading name of Hub FS Limited. Based just north of Bristol, SEMH is an independent, whole of market broker and a true specialist in self employed mortgages, helping business owners across the UK find great mortgage deals.

Graham's market commentary and analyis is regularly quoted in the national press and media, including The Guardian, Telegraph, Financial Times, and BBC Bristol.