It is a common misconception that lenders would not accept situations where there are two people to be named on the mortgage but only one person to be named on the property deeds. Such a situation could arise when considering purchasing a property utilising a joint mortgage with parents.
In fact, some lenders will accept applications from joint borrowers where only one of the applicants will own and live in the property. This is called a Joint Borrower Sole Proprietor Mortgagee and will mean that one of the applicants will be named on the mortgage but not on the deed.
A Joint Borrower Sole Proprietor Mortgage essentially means there are two borrowers but only one owner, or alternatively, there is a joint mortgage, but only one name on the deeds.
These mortgages are often arranged for affordability reasons. For example, where one of the joint borrowers (the one who is not going to be on the deeds of the property) assists the person who will become the ‘owner’ by allowing them to increase their borrowing capacity.
Most commonly, these mortgages are set up between close family members such as mum or dad going on the mortgage of an adult child. Spouses also enter into such arrangements, with one spouse being named on the mortgage without being named on the deeds as an owner.
Other relationships between joint borrowers are more uncommon but can be considered. Joint Borrower Sole Proprietor Mortgages are commonly used in a residential purchase. Sometimes the individual not named on the property will be referred to as a sponsor.
Matt Cornall of 360 Financial Services comments “Joint Borrower, Sole Proprietor mortgages have become more and more popular in recent times and as a result, offer some very competitive options from High Street lenders. They are seen as a modern-day “Guarantor” mortgage and offer a more flexible approach with the ability to maximise saving on the potential stamp duty liability, therefore, make this proposition a very viable option for many first-time and next-time buyers. Affordability checks need to be completed on all parties named on the mortgage and the sponsor will need provable income to be able to afford their outgoings as well as be in a position to assist towards the proposed purchase.”
When setting up a Joint Borrower Sole Proprietor Mortgage, Independent Legal Advice (ILA) is essential. The person being named on the mortgage without being named on the property will be exposed to legal and financial risk. The lender will insist that they receive independent legal advice so that they are aware of the risks associated with the arrangement they are entering into.
It is important to establish that when there are one or more parties on a mortgage application, that the borrower who is not the owner will not benefit from any equity in the property. Receiving ILA protects the Banks Legal Charge over the mortgaged property, allowing them to take action against both borrowers should they need to in the event of default.
Independent legal advice will have to be sought from a firm of solicitors not already involved in the transaction, i.e., the borrower not being named on the property deeds will need to seek this from a firm that is not the firm dealing with the remortgage conveyancing (often connected to or recommended by the lender).
Holmes & Hills Solicitors are experienced in offering the necessary Independent legal Advice to those involved in Joint Borrower Sole Proprietor Mortgage transactions.
A Mackman Group collaboration - market research by Mackman Research | website design by Mackman
