Happy to go on your children’s mortgage but do not want to trigger higher stamp duty
Happy to go on your children’s mortgage but do not want to trigger higher stamp dutyYou’ve probably heard the countless radio ads saying you can guarantee a personal loan but what about guarantor mortgages? In the 80s and 90s guarantor mortgages were all the rage but the credit crunch all but killed off the remaining lender participants until now. Read on to find out how you can help your child onto the property ladder with the use of a guarantor mortgage or a new bread of mortgage products called Joint Borrower Sole Proprietor Mortgage.
I’m a great believer in need drives a market to innovate and on this occasion, it has produced a new breed of guarantor mortgage. The housing shortage in the last couple of decades has generally stopped first-time buyers getting on the property ladder with landlords acquiring the stock. However, the introduction of the new stamp duty land tax levy for second properties at 3% has, in my opinion, caused a rethink, and forced mortgage lenders to come up with a solution for first time buyers – so at last, we have a worthwhile guarantor mortgage.
Let’s start with the major gain. With the careful selection of a lender, a parent could go on a mortgage application to help their child buy a property and use their income towards affordability. Straight-forward enough! However, the clever bit is the parents do not need to be residents of the property and importantly do NOT need to go on the title. And if they’re not on the land registry then the purchase enjoys first-time buyer stamp duty tax rules – which are great by comparison.
Important note there are risks involved for the applicant who is jointly and severally liable for the mortgage, but not a legal owner of the home so both parties should always seek independent legal advice.
So how many lenders sign up to these guarantor type mortgages or by its correct name of Joint Borrower Sole Proprietor Mortgage? Just over half a dozen so you will need a mortgage professional, such as Niche Advice, to guide you as they all have a different view on lending criteria and client affordability.
There is a small downside; when using guarantor income the guarantor’s age will determine the maximum length of the mortgage so bear this in mind. That said we can potentially go up to 80 years old at the term end for the right customers.
Niche Advice offers appropriate advice to applicants looking to use their parent’s income for mortgage affordability so if you want to find out more about Joint Borrower Sole Proprietor Mortgage please complete the Contact form on this website or call T: 020 993 2044.
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines.
