Joint Borrower, Sole Proprietor Mortgages
Over recent years, the Government has implemented various schemes to help first time buyers get onto the property ladder. These have included the Help to Buy ISA, the Lifetime ISA and Help to Buy equity loans which have proved widely successful. However, many still struggle to either get onto the property ladder, or stay on there when looking to move to a bigger property. People face fierce competition from more experienced buyers or investors who are often better placed to make offers on properties.
One solution to this may be the ‘joint borrower, sole proprietor’ mortgage. This allows for some of the parties who are named to buy the home, but with the aid of someone else ‘in the background’ on the mortgage. All parties are jointly responsible for the mortgage payments, but not all of them own the property meaning that they do not all have a legal claim over the property. This means that if one party cannot pay the monthly payments, one of the other parties will have to pay.
We are dealing with an increase in these types of mortgages, often with parents coming on the mortgage too to help boost the income needed to get the necessary mortgage offer. It can often be the case that these deals are fixed for around two to five years, by which time hopefully the first time buyer (although please note you do not have to be a first time buyer to take out a ‘joint borrower, sole proprietor’ mortgage) will have an increased salary or have built up more equity in the property. This would mean that the other joint borrowers could then step away after a re-mortgage has occurred.
When taking out these mortgages, the borrowers who are not actually buying the property will also need to take independent legal advice from another solicitor, this is something we can help with as well. This is to ensure that everyone is fully informed of their obligations under the ‘joint borrower, sole proprietor’ mortgage and the implications of what they are entering to.
Often people may not realise that there are other options available or may have not have appreciated all of the responsibilities this will entail. It is important to have a full discussion before entering into the mortgage. It will be a requirement of the mortgage lender that this advice has been given and they may require proof of this before being able to complete on the purchase.
If you have any questions on the above, or any other questions, please do not hesitate to contact a member of our property team.