A joint borrower sole proprietor mortgage is not the same as a standard mortgage. It is a means for friends or family members to help increase your affordability without handing in cash. There would be a maximum of four people on a joint mortgage application, but the house will be owned by only one. So, here, other applicants work as guarantors, not as co-borrowers. Joint borrower sole proprietor mortgages are commonly used by parents who want to help their children get onto the property ladder, but this method is also popular among friends and siblings.

There are certain conditions that you need to meet to qualify for a mortgage. Even if you are trying to get your foot on the property ladder, you are required to pay down a deposit. The down payment must be at least 5% of the sticker price of the house. In addition, you should have a good credit score. Though standard mortgages seem to be much more affordable than commercial mortgages, it is not necessary that you would be approbated.

Lenders carefully examine your overall credit profile. If they find that the risk of default is high regardless of your good credit rating, they will most likely repudiate your application. A high risk also attracts high interest rates. Here comes the role of a joint borrower sole proprietorship mortgage.

What is a joint borrower sole proprietor mortgage, and how does it work?

One of the benefits of such mortgages is that they increase your chances of being accepted even if you are on low wages. By adding your loved ones to your application, repaying capacity will be evaluated based on their income sources, too. This is because they all act as guarantors. When somebody enters into a mortgage agreement as a guarantor, they promise to take up the responsibility to discharge the debt in case you fail to pay it off.

Having said that, all joint borrower sole proprietor mortgages are similar to standard mortgages. No lender would approve your application without running an affordability check. Since your loved ones are guarantors, their credit rating and financial condition will also be checked. They must be able to pay down the mortgage when you fail or refuse to do so. Do not forget that there is an age limit. Lenders usually sign off on joint borrower sole proprietor mortgage applications only when you are no older than 70 at the end of the contract.

It is vital to know that only the borrower would obtain the title of the property at the end of the contract. The rest of the people are guarantors. They cannot claim any right to have ownership of the property. Another important thing to note is that guarantors are not supposed to adhere to the agreement throughout the mortgage term.

The ultimate goal of a joint borrower sole proprietor is to help you get your foot on the property ladder. As soon as your financial condition improves, guarantors could get their names off the mortgage contract. It means your loved ones who decided to act as guarantors could easily exit the agreement. Normally, after the end of a fixed interest period deal, they have an opportunity to release themselves from this obligation.

As long as there are guarantors, they will be liable to repay the mortgage in case of default. Remember that this would affect their credit rating too. Make sure that you will not fall behind on payments; otherwise, they will struggle to qualify for a loan at lower interest rates down the line. The bad effects of a poor credit rating are far-reaching.

How does a joint mortgage differ from a joint borrower sole proprietor mortgage?

The key difference between both types of mortgages is who would receive the title of the property. With a joint mortgage, all applicants named on the mortgage application are property owners. None of them act like a guarantor. All of them will be responsible for the mortgage settlement partly as well as completely. You could take out a joint mortgage with your parents or spouse.

However, a joint borrower sole proprietor mortgage is not the same. Not all applicants who have their names on a mortgage application will be entitled to obtain ownership of the property. Only one of them would own the property, and the rest of the applicants work as guarantors who would be paying the mortgage unless the deemed owner’s finances do not improve.

It is always suggested that you contact a financial expert who will guide you on whether you should choose a joint mortgage or a joint borrower sole proprietor mortgage. Getting expert advice will help you make the right decision by exploring all possible options. Discuss your options with your family and friends to arrive at the conclusion.

Advantages and drawbacks of joint borrower sole proprietor mortgage

Here are the upsides and downsides of these mortgages:

What if your guarantor dies?

There is a scope of four joint borrowers when it comes to applying for a joint borrow sole proprietor mortgage. However, sometimes, it could be difficult to arrange people who would feel inclined to risk their income without any share in the property. So, if you have only one guarantor who dies and your financial condition is still not good enough to continue to make payments on your own, you would have to sell the property.

Things to consider while taking out a joint borrower sole proprietor mortgage

Here is what you should consider while using these mortgages:

• You should take legal advice. It is not like a joint mortgage. Risking your income for a property that you cannot own does not seem a wise act. Lenders often insist on taking some expert advice before entering into the contract.
• The borrower should decide on the time when non-proprietors would exit the agreement and how payments will be made if they cannot adhere to the payment plan.
• It is recommended that you take out insurance. It will indemnify you for the loss you face as a result of job loss, for instance.
• Consider other options, too. There are various types of mortgages that might fit your budget. Do some research.

The bottom line

A joint borrower sole proprietorship mortgage is different from a standard mortgage. A golden rule of thumb says that you should understand all the upsides and downsides of these loans before signing the agreement. Take advice from a financial expert.

Do research and explore other mortgage options. If all options do not suit you, you should try to figure out ways to improve your income sources.