Joint Borrower Sole Proprietor

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Joint Borrower Sole Proprietor

If you have a small income, you can seek a mortgage that only corresponds to this income. This can often prevent you from mortgaging a home or property with a higher value.

A Joint Borrower Sole Proprietor (JBSP) mortgage offers you a way out of this. With this type of mortgage, multiple individuals can borrow the same property or asset while only one individual legally owns it. The other individuals are known as joint borrowers.

If you are considering mortgaging a house under a JBSP mortgage, our Joint Borrower Sole Proprietor solicitors can help you. Here at the London-based Adam Bernard’s law firm, our Independent Legal Advice solicitors also help you with finalizing and securing a JBSP mortgage.

Common Examples of JBSP Mortgage

A JBSP mortgage is an effective solution in a variety of scenarios.

Consider this example. You are the parent of a child seeking to own a home. Your child doesn’t have sufficient income to qualify for the mortgage. You can agree to be jointly on the mortgage of your child’s house.

This allows your child to own the house. You and your child can jointly make the mortgage payments. Being a joint borrower, you effectively remove the hurdle of low income ceiling that barred your child from getting the mortgage offer.

The same applies if you are a friend trying to help another friend who can’t afford a mortgage on their own.

If you are unsure whether or not you should jointly be on the mortgage of a relative, friend, or partner, our joint borrower sole proprietor solicitors can help. With the guidance of our commercial property solicitors, you can make an informed choice and make sure your interests are protected.

What is a Declaration of No-Beneficial Interest?

A declaration of no-beneficial interest is typically required when you are applying for a JBSP mortgage. This is a kind of a deed of trust that clarifies several complicated issues pertaining to the mortgage. A declaration may cover the following questions:

  • What happens is one of the joint borrowers wants to leave the mortgage?
  • Who is liable if the terms set out in the declaration are breached by one of the borrowers?
  • What happens if one or more parties responsible for the mortgage repayments fail to do so?

You can also confirm in the deed that the non-legal owner of the mortgage will have no beneficial interest in the property. This means that the non-legal partner will not be able to receive any money if the property is sold in the future, or if it is rented out.

It is highly recommended that a declaration of no-beneficial interest is signed by the non-legal owner when entering into a JBSP mortgage. Failure to do so may cause Her Majesty’s Revenue & Customs (HMRC) to consider the non-legal owner as one of the beneficiaries. This can lead to higher stamp duty rates.

Our joint borrower sole proprietor solicitors can help you draft the declaration. Our commercial conveyancing solicitors can also ensure that the declaration protects the interests of both the legal and non-legal owners of the mortgage.

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Why Do You Need Independent Legal Advice?

When entering into a JBSP mortgage, you will typically be required to seek the advice of Independent Legal Advice solicitors. The ILA is important because the JBSP mortgage carries significant risks yet no benefits for the joint borrower.

The risks involve the following:

  • You are directly responsible as a co-owner of the mortgage to ensure repayments
  • Your assets are on the line in case the repayments are not made
  • Your assets can be seized by the mortgage lender in case one or more borrowers default on the mortgage

You face these risks even though you are not a legal owner of the property and you can’t legally receive any benefits from it.

Experienced commercial conveyancing solicitors can help you fully understand these risks. This allows you to make an informed choice and go into the JBSP mortgage only after you have weighed the risks. Once you have received this advice, the ILA certificate is provided to the mortgage lender.

An ILA provided by reputable independent legal advice solicitors is used as a proof by the lenders that the joint borrower was fully aware of the risks involved. This is to prevent the borrower from claiming that they were not fully aware of the risks and hence can’t be personally liable for the mortgage.

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How Does ILA Work?

The independent legal advice solicitors review all the mortgage documents and financial details of the contract. They also discuss several important matters in a one-on-one meeting with you to inform you of the nature of the contract, and ensure that you fully understand the terms. Such a meeting can also be done through a video call if allowed by the lender.

During the ILA meeting, you can expect the following matters to be under discussion:

  • The risks involved. The commercial conveyancing solicitors attending the meeting will likely apprise you of the risks. These involve possible bankruptcy or loss of your home if you fail to meet the repayment obligations under the terms of the mortgage.
  • The financials. The commercial property solicitors at the meeting will consider your income and other financial assets to discuss with you whether or not you can meet the ongoing repayment obligations. You will also be asked if you have any assets to support you in case a problem with repayments occurs.
  • The voluntary agreement. This is where the solicitor will ask you if you are agreeing to be a part of the JBSP mortgage of your own free will and while fully comprehending the risks involved.

If the meeting concludes successfully, you are then sent an Etridge letter. You are to sign the letter and send it back to the solicitor upon which a mortgage certificate is created and provided to the mortgage lender.

Many lenders allow you to seek ILA from any qualified independent solicitor. The commercial conveyancing solicitors at the London-based Adam Bernard’s have an extensive experience of handling JBSP mortgage cases.

Our commercial property solicitors can work with you to provide ILA, ensure that you are able to negotiate suitable terms with the lender, and deliver the mortgage certificate to your lender in a fairly brief time. This helps you proceed with the agreement without any delays.

Get in touch with our expert Joint Borrower Sole Proprietor Solicitors today.

What if the Joint Borrower Wants to Leave?

As discussed above, the non-legal owner can give notice of their intention to leave the mortgage if they have signed a deed of trust with the legal owner. In such a case, the legal owner has the option to either sell the property on open market or remortgage the property within a stipulated time.

If the deed of trust does not exist, the parties of the mortgage have other options they can explore. You can apply for a deed of release. This is issued by the lender and releases you from the terms of the mortgage as the non-legal owner.

However, the lender is not likely to issue the release deed if the legal owner of the mortgage is unlikely to meet repayment commitments. On the other hand, if the financials of the legal owner have approved since the mortgage was purchased, you may be able to secure a deed of release.

You can also agree with the legal owner to have the property sold. In case such an agreement is not forthcoming, you can explore the possibility of a court order. However, a court will typically not issue an order to sell a property if you are a non-owning party, which is precisely the case in JBSP mortgage.

It is for these reasons that you must consult experienced commercial conveyancing solicitors when entering a JBSP mortgage agreement. With the expert advice of commercial property solicitors, you can ensure that you become a party to the mortgage while keeping your options open.