There is so much talk in the press about first-time buyers’ inability to get onto the housing market being down to the so-called "Double Deposit" but that's only the first hurdle they face. If they are lucky enough to be able to rely upon the Bank of Mum and Dad or have been prudent enough or had the ability to be able to save for their deposit, then potentially the bigger hurdle is affordability.
Let me explain.
With house prices running away over the last decade, there is now a significant gap between house prices and what a lender is prepared to offer in terms of the mortgage. With most lenders still looking at 4.5 times salary, this leaves many short of getting close to the required income levels to get their first mortgage.
The solution was always a guarantor mortgage but looking through what lenders are offering in terms of their products, there really isn’t a viable guarantor option unless you are going down the route of a professional vocation – your doctors, lawyers, and accountants. The likes of Leeds Building Society and Scottish Building Society will offer products but there must be an identifiable career path before they will consider lending.
So what do you do if you don’t want to be a lawyer, a doctor, or an accountant? The answer is a Joint Borrower Sole Proprietor mortgage.
THE NUTS AND BOLTS
In essence, a lender will allow someone else to take the mortgage out with you but you will be the owner and the two of you will have the responsibility of paying the mortgage. So you get the benefit of your mum's salary to help with affordability without her getting lumbered with Additional Dwellinghouse Tax!
WHOSE LENDING?
Barclays - they will take the mortgage up to the eldest applicant’s 70th birthday and you can have a maximum of 2 incomes. They will lend to 90%. Non-title holder will need separate independent legal advice.
Clydesdale Bank – the must be to borrowers and one owner. Borrowers must be immediate family members. The background liabilities of the borrowers will be considered for affordability. Again, independent legal advice for the non-title holder. Not available for buy-to-let. They will go to the eldest applicant's 75th birthday.
Furness Building Society - usually where a parent wishes to assist the child in purchasing a home. Siblings considered one referral. They will go to the eldest applicant's 75th birthday. Separate legal advice is required for the non-title holder. The non-title holder cannot reside in the property.
Skipton Building Society - no restrictions around relationships. Will accept up to 4 incomes. Lend up to 95%. No product restriction. Independent legal advice is required for the non-title holder. Will go to the eldest applicant's 75th birthday.
Newcastle Building Society - maximum to borrowers. Currently need a 20% deposit. On the open to family members. Will take the eldest applicant to 80th birthday. Not available for buy-to-let. Only available on a repayment basis. Independent legal advice for the non-title holder.
DOWNSIDES
It certainly isn’t the silver bullet!
The main downside is that if you were doing this kind of mortgage and being helped by your parents then the monthly payment for the mortgage could be quite high. This is on the basis that the mortgage is based upon your parent's age and if they are in their sixties then potentially you are looking at a 10 – 15 year term. The upside is that the mortgage will obviously be paid off quicker.
The lender will take into account the outgoings of the other borrower. So if they are barely keeping their head above water then their additional income may not be as much help as you think.
There are lenders who will look at taking a mortgage to the 75th or even their 80th birthday but the non-title holder will need to be in an occupation that will allow them to work until the n. You’re going to get an easier ride from a lender where your old man sits behind a desk but it’s going to be more problematic if he’s lugging bags of coal for a living.
SUMMARY
It’s a great product and has been very popular with many of our clients. It certainly is one of the hidden gems that the non-broker world doesn’t really know exists. If you can get around the potentially higher monthly payments, then it really is worth exploring. I guess that the hope would be that if you did take this type of mortgage that by the time you decided to remortgage 2/5 years down the road then the noose around your old man’s neck can be released and you can take full responsibility for the mortgage.
More than happy to have a chat with you to see if this is going to work for you.