Buying a property with your children (18+) - How does Joint Borrower Sole Proprietor work?

When you buy a property with a mortgage there are 2 parts, the debt and the asset.

If a parent buys a property with their children to help them on the ladder, historically they may have gone onto the debt (mortgage) and the asset (property). The problem with this in 2019 is that if either party owns another property and they are not replacing their main residential property, they could pay the higher rate of stamp duty.

Joint borrower sole proprietor or borrower non proprietor refers to when the borrowers do not match the names on the asset. For example, consider Dr Riz who wants to help his daughter Amira who is medical student to get on to the property ladder. Dr Riz already has a residential mortgage as well as other buy to lets. They have seen a flat in London for £450,000 which they want to purchase. If Dr Riz & Amira went on the mortgage as well as on the title deed, the stamp duty on this transaction would be £26,000. They have paid additional stamp duty because Dr Riz already has a residential property. However, if Dr Riz went on the mortgage with Amira but not on the title deed, as Amira has never owned a property the stamp duty would be £7,500. When Amira qualifies in the future, they plan for her to be able to take on the mortgage in her own right and her dad to come of the mortgage with the lenders permission.

There are a limited number of lenders who allow mortgages on this basis. The parties going on the debt but not the asset should have independent legal advice to ensure they fully understand the implication now and in the future. Lenders will assess affordability for all commitments so ultimately there does need to be the capacity to pay both mortgages. In addition, it may be permissable, with the lenders permission, to have a lodger as well.

This article is for general information purposes only and does not constitute advice. The author does not accept liability of any errors of omissions. Readers are recommended to take professional advice from a suitably qualified professional regarding their own personal circumstances.