There is no question that things remain challenging for those hoping to purchase a first home. Whilst the incredible rate of house price growth seen over the last few years has slowed, the numerical gains on already high property prices remain eye-watering. Indeed, according to data from the Office for National Statistics, the typical property has gained £16,000 in cash terms over the last year alone.
Couple that with rising interest rates since the Mini Budget and stubborn inflation, and it’s clear that purchasing a first home is far from easy.
One option that can prove useful for first-time buyers, or even those looking to take a step up the housing ladder, is joint borrower sole proprietor mortgages (JBSP).
The reality of the steep house price growth seen in recent years means that even the most diligent could struggle to make the sums add up with a conventional mortgage, whether that’s through a lack of a deposit, issues with passing affordability tests, or both.
JBSP can offer a route past that, though, with the parent taking on some of the responsibility for ensuring the mortgage is paid off, but without ownership rights over the property.
For example we had a case recently where a parent supported their child purchasing a flat, allowing a split term so that the parent could clear their contribution more swiftly than the child. Both applicants had the affordability for their stake assessed independently so that an accurate decision could be delivered.
Creative product use
However, it’s important to recognise that JBSP can be utilised in other, perhaps more creative ways. For example, at Mansfield Building Society we have helped a host of buy-to-let borrowers make use of this form of product in order to start a portfolio.
JBSP might seem somewhat counterintuitive when considering the needs of property investors, but in practice it can offer an excellent way to clear some of the hurdles faced by would-be landlords.
Purchasing alongside a close family member already involved in the rental sector can mean they avoid some of the higher interest rates, costlier fees and more challenging risk assessments that a first-time landlord would normally need to consider.
There may even be a tax benefit involved too, should the buy-to-let be registered in the name of the lower earner. This could mean that the tax paid on the returns from the investment property are lower than would have otherwise been the case.
Versatile approach pays dividends for borrowers
A big factor in the growth of JBSP is obviously the need to support affordability. The reality is that prospective first-time buyers all too often are unable to secure a mortgage completely off their own backs which would allow them to purchase the property they have set their heart on.
And with the demise of the Help to Buy scheme, a useful tool in the arsenal of would-be homeowners has been removed, putting greater emphasis on alternative measures such as JBSP.
Beyond the need for JBSP to support affordability, the fact that it can be put to use in a range of different ways is also a big selling point.
Ultimately though this relies on the approach of the individual lender. There’s no use picking out a variety of different ways the criteria can be employed, if the lender is too stringent in their assessments, meaning no cases actually get through.
Getting into the details
At Mansfield we have always prided ourselves on taking a different approach. We believe in manual underwriting, and allowing our experienced team of underwriters to truly get to grips with the elements of a specific case.
It’s too easy for apparent complexities to knock an application off course, if the lender doesn’t take the time to assess the facts comprehensively.
If lenders are versatile and ensure that their decisions are based on the relevant facts and not automated red flags, then greater numbers of doors can be opened for borrowers.
Tom Denman-Molloy is intermediary sales manager at Mansfield Building Society