Joint borrower sole proprietor mortgage - any advice on pros and cons

[Snozzlemaid]

Dd is interested in getting on the property ladder as soon as she can. She is currently on a 20 contract with an average of 15 hours overtime every week.
She has a healthy deposit saved up and is looking at a modest property. However, the amount she is being advised she can borrow is about £30,000 below what she would realistically need because a high portion of her income is overtime.
If I had plenty in savings to help her with this, I wouldn’t hesitate to do so, but it would wipe out a big portion and I would then wish to help ds the same.

I have been reading up on JBSP mortgages and feel this is a way I could help her. DP and I own our house outright so have no mortgage or rent and I work full time. So my income would help her to be in a position to borrow enough.

As far as I can see she would still be classed as a first time buyer so she could get her help-to-buy bonus and wouldn’t be required to pay stamp duty. The only downfall would be the length of the mortgage would be shorter as I’m 54.

We have done a budget plan and she could afford to pay the mortgage on her own and would remortgage as soon as she can on her own to remove me. So there won’t be any financial burden on me unless she loses her job for example so I know I would then need to help make the monthly payments.

It feels like a great way to help her to get started and we’ve been looking at the offer Nat West have for this product.

I’m aware I will need to get legal advice as part of the agreement but does anyone have experience of doing this?
What are the bad points or things I should consider carefully.
Thank you

... or you could remortgage your home for the amount needed, which would be considerably simpler.

But then I would be paying a mortgage which I don’t really want to do again. And I would be stuck with it until all repaid. I will come off the mortgage with her as soon as I can.
I know I would have a mortgage jointly with dd but I wouldn’t be making any monthly payments towards it.
Dd doesn’t want or need me to pay it, she just needs my income to be used to help her borrow a little more because her income is a lot of overtime each week which makes her hours up to a full time wage. Banks will not lend quite as much as she needs.

How would you “come off the mortgage”? Do lenders let mortgage payers do this? I don’t think so.

I dont think banks allow this do they? Does someone have to be on a land register as the owner if they have a mortage on the property or is it the other way round?

Banks dont like someone else possibly having a charge on the property in case they reposess it.

It’s called a Family Backed Mortgage at Nat west. It definitely is a thing.
I would have no ownership of the property at all.
DD would be sole owner.

When dds earnings are higher in the coming years she can remortgage and apply in her own name outright.

But then the property would be worth more I assume? Its a never ending cycle perhaps?

I don't see why you wouldn't do this really, if you're not in a position to help with a deposit it's the next best thing. Are interest rates comparable to standard mortgages?

If she’s staying in the same property she won’t need to borrow more though at that time.
Obviously if she wanted to move to a bigger place that would mean she would need to borrow more and she would need to do that on her own at that time.
This is just to help her get a foot on the ladder.

You get the same offer on rates and deals apparently.

I am a borrower and my son is the sole proprietor on a JBSP mortgage with Skipton. They will give a term until you are 70. Can DD afford the monthly repayments on that in the short term? She can extend the term when she remortgages to lower monthly payments. Plus there will be more equity in the property by then. You have to get independent legal advice to make sure you understand the joint and several liability.

If the property goes up in value DD will own that equity, not the bank. And she will get a better LTV interest rate.

@Snozzlemaid the only negative I can see is that overtime isn't guaranteed (which is why it's not counted towards her eligibility) so if her work stop giving her it you will be responsible for the mortgage too.

OK, but there’s no guarantee that her earnings will get higher, and she could stop paying the mortgage for one of several reasons and then you would be on the hook. It’s pretty risky.

Amazing. Thank you. I was hoping to hear from someone who has done this.
Yes the payments would be manageable for her.
And we’ve had discussions about if she can’t for whatever reason and it doesn’t work out she would have to sell the property and move back in with me and her dad.
Long term, that’s what we were thinking - when she remortgages she can extend the length of the mortgage then.

Its not borrowing more, its the deposit amount or LTV thing isnt it?

Not sure on this but lets say she is on 50k so can only borrow 200k, the flat is worth 230k which is why she is 30k short

In 5 years, her wages have gone up 10% to 55k and the flat has gone up 10% to 253k. She couldnt remortgage I presume because 4x 55 is 220 and she is still 33k short?

I dont even know if it works like that to be honest

Actually it cant be because I havent thought about what she has already paid off in that 5 years

Scrap that. Im not a financial adviser!!!

Good point. Ive already given a long explanation which is a load of rubbish!!!

Jumping on your thread because I have exactly the same scenario. Also don’t know anyone who has done this. It’s a fairly new product though isn’t it? (was looking at Skipton product) so not much in the way of feedback from real life consumers yet.

I suppose the most obvious downside is if they (our YP) lose their jobs and can’t easily get back in to work. Or, and this is some thing that does have to be given consideration because sadly these things do happen even when we’re almost 100% sure it won’t happen to us - what about family relationship breakdown? Could end up being a right mess. I’m struggling to feel comfortable with (essentially) putting my home on the line after making so many sacrifices to get the mortgage paid off. And that’s coming from a position of a fabulous relationship with my DD, and always has been, and no reason to think it might ever change. I always think about what if she meets someone in future and that changes the dynamic between us though? Have close experience of this with DHs DD and her DM - to whom she has always been extremely close and had a fantastic relationship with, she gets married and her DM helps them out hugely financially and lo and behold the new husband falls out with the mother and now it’s an unholy mess. I think I’m very risk averse. Hmmmm….

I’m risk adverse too. So am trying to think of all scenarios as you are.
It’s good you do have to have independent legal advice so hopefully they will explain the risks.
And yes we have a fab relationship too but have thought about what could possibly happen.
It’s a tough one for sure.

And we’ve had discussions about if she can’t for whatever reason and it doesn’t work out she would have to sell the property and move back in with me and her dad.

She could end up selling at a loss, if she can sell, which would have huge implications on buying again. This economy isn't predicted to improve anytime soon.

We did this, with Skipton about 5 years ago. I think it was called Joint Borrower Sole Beneficiary" at the time. Why wouldn't you do it if you can afford to cover her payments if she's made redundant? It's effectively guaranteeing her mortgage.

We took out a JBSP mortgage with Metro bank so that my son could get on the property ladder. We are all (myself, my husband and my son) liable for repayment of the mortgage but my son is the sole owner of the property. My son is able to pay the mortgage on his own.

After the first fixed interest rate period ended (2yrs), he was not in a position to get a mortgage in his own right so we are still on the mortgage (5yrs fixed interest rate). You have to be prepared to remain on the mortgage until they can get a mortgage on their own. The majority of mortgages pay back the interest initially so the equity builds up slowly. You will need to have a repayment mortgage, not an interest only mortgage, so higher monthly payment. Otherwise you will not be building up any equity.

The number of banks that offer this product are limited. At the time there was ONE lender we could use. If you have a fixed interest rate product, you may not be able to shop around and will have to accept moving onto another product from your current lender, which may not be the best interest rate.

Your credit rating will be impacted as you are also liable for the JBSP mortgage. The mortgage will be included in affordability checks if you apply for credit in your own name, including credit cards, car leases, etc.

The term of the mortgage is dependent on the oldest person on the JBSP mortgage, so shorter term = higher monthly payment.

The property belongs to the SP, so as part of the mortgage offer you will need to have independent legal advice. This basically boils down to, do you understand you do not own the property and have no interest in it, but the lender can come after you for repayment.

For us it came down to, can my son afford to make the monthly payments and do we trust him to continue to make the payments.

Thank you. Yes we could cover the monthly payments if she couldn’t.

We have one for our son (19) we’ve had it since he was 18. He’s a student. No problem with it. It’s a 5 year fix and we’ll come off the mortgage at renewal and (hopefully) do another JBSP mortgage for our other child.

Son put down 5% of the deposit, we matched that.

@whenyouwereyoung Thank you. That’s all really helpful. And I was wondering about the effect on my credit rating.
All really helpful.

Great. It’s good to hear other’s experiences. Thank you.