First Time Buyer joint mortgage

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First Time Buyer joint mortgage
First Time Buyer joint mortgage

First Time Buyer joint mortgage

Lee Gathercole and Neezam Romjon explain how joint mortgages work for First Time Buyers.

Approved by The Openwork Partnership on 19/02/2024.

Who is classed as a First Time Buyer?

The general definition of a First Time Buyer is anyone that’s never owned a property. That could be a property to live in or a property to let out. Either way, if you’ve never owned a property before, you are considered a First Time Buyer.

One or two lenders will actually consider you a First Time Buyer if you haven’t owned a property for a certain period of time – like five years, for example.

How do joint mortgages work for First Time Buyers?

You’ll apply for a mortgage in joint names. In terms of your credit score and your income, you’re assessed individually. Even if one person hasn’t got an income, you’re still responsible for the mortgage so they assess you both as First Time Buyers.

They would assess your income, outgoings, and credit score and add your total income together for the overall affordability.

My partner is a First Time Buyer but I’m not – what are my options?

We do see this quite often. The main thing to really be aware of is the stamp duty implication. If you are not a First Time Buyer and you’re buying together, you won’t qualify as First Time Buyers under the stamp duty incentive.

You should look into that to understand what the cost is. Otherwise, the mortgage is assessed the same way. The lender will look at your payment track record for previous mortgages, and on your partner’s rent, for any missed payments on a loan or anything like that.

If you’ve not had any issues, generally lenders are quite comfortable. The biggest implication is more to do with stamp duty than the mortgage.

Do both buyers have to be First Time Buyers?

To buy a home you both don’t have to be First Time Buyers. If one is and one isn’t, that’s not a problem.

The main downside is around the stamp duty incentive for First Time Buyers. If someone’s already owned a property in the past then you would then be liable for full stamp duty.

However, there are ways around that if you’re looking for someone to support you on an application. It’s quite common for a father or mother to support their son or daughter and there is a specific type of mortgage set up for that.

It means the First Time Buyer keeps their status for stamp duty and the mum or dad just supports them on the mortgage application. It’s called a Joint Borrower Sole Proprietor mortgage.
Do I have to pay stamp duty if my partner is a First Time Buyer and I’m not?
Yes. It does depend on the purchase price you’re buying at. We’re recording this in February 2024 and there might have been changes by the time you’re listening to this.

If you’re buying with someone that isn’t a First Time Buyer then you will not benefit from the First Time Buyer incentive. But you still might not pay stamp duty if you’re buying below the threshold.

What does being joint tenants or tenants in common mean?

There are two types of joint ownership. Joint tenants is where if you’re buying as a couple and you both own the property in its entirety – both own the property 100%. If anything were to happen to one of the owners, it automatically passes to the other owner.

The alternative is tenants in common – this is something you might do if you buy a house with a relative or a friend. You can split the property into shares. You might own 50% and your friend owns 50%. With this, you can actually leave your share to a specific person. It might not necessarily be the other owner.

That’s the general overview. The most common one is joint tenants when you’re buying as a couple, but it depends on your setup. If you’re unsure, seek legal advice.

Can I get a mortgage with a guarantor?

There are a few schemes that are very similar to the old style guarantor mortgage. They have changed a lot over the years. A few years ago you may have been able to just add someone on to the mortgage, and as long as they owned their own house the lender would be happy.

Nowadays it is all based on affordability. The most common type of guarantor type mortgage we see is the Joint Borrower Sole Proprietor mortgage and we’ve done a podcast separately on that.

It’s a mortgage with a joint borrower where they don’t own the house with you. You’re benefiting from their income. There are a lot of factors there – their age, credit commitments, if they have an existing mortgage, their income and whether they’ve had bad credit.

There are other other schemes as well, and a qualified adviser will be able to explain those in more depth to you.

How much can you borrow as a First Time Buyer with a joint mortgage and how much deposit do I need?

There’s no hard and fast rule in terms of borrowing – it might be four or five times your salary as a general income multiple, but everyone is assessed very differently.

In my experience, if there’s a joint mortgage and two incomes, they tend to be a little bit more flexible than if you’re buying on your own.

The deposit you need is 5% as we’re talking today in February 2024. That does change but that’s the minimum generally needed, depending on your situation.

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What is a Joint Borrower Sole Proprietor mortgage or JBSP?

A Join Borrower Sole Proprietor mortgage is a guarantor type mortgage. If, for example, I was buying a property as a First Time Buyer and my mum wanted to help me because I couldn’t get the mortgage amount I needed on my own, she would come onto the mortgage with me.

We would use her income to get me a bigger mortgage. However, I own the property on my own – that’s the ‘sole proprietor’ part. Mum’s helping me with the mortgage but she’s not going to own the property.

There are some benefits to doing that. One is stamp duty – we won’t have to pay an additional rate because my mum owns her home. It means you can have someone on the mortgage with you but they’re not on the property deeds, so you qualify for the First Time Buyer stamp duty incentive.

Some lenders sometimes call it a Family Support Mortgage – there are different names for it, but ultimately that is how it works.

Can you transfer a joint mortgage to one person?

Yes, potentially. It could be that there are two of you on the mortgage and you decide to separate for whatever reason – you could look to transfer the mortgage and the property into one name. You can do that with your existing lender at their discretion.

You would need to show you can afford the mortgage and everything on your own. A new affordability assessment would be made.

The other, more common way to do it is to remortgage and remove someone from the deeds and the mortgage. Again we need to make sure the mortgage is affordable in just one person’s name and there is a little bit of legal work there to be done.

How do you calculate a First Time Buyer joint mortgage?

This is going back to affordability. There’s no straight answer. Lenders will calculate how much they lend to you as a First Time Buyer getting a joint mortgage, by looking at your total incomes together.

They look at how much you are both earning and also your total outgoings – financial commitments between you like credit cards, car finance, personal loans, childcare, nursery fees and other costs for financial dependents and children. All those things will factor into how much they will lend to you.

If you were to walk down a high street and popped into three different banks, you’d probably come out with three very different borrowing figures. It just highlights the importance of not going straight to your bank and thinking that they will all lend you the same amount. It really does differ and it really does depend on your circumstances.

Another factor is how much deposit you’re putting down. With a 5% deposit the amount you can borrow will probably be slightly less, because lenders are a bit more cautious on affordability. If you have a 25% deposit they will probably be willing to lend you a bit more because there’s less risk to them that they won’t get their money back if they needed to repossess the property.

Lenders change their affordability assessments all the time. They look at the cost of living and other data – those things feed into how they calculate the borrowing. It’s all very lender specific.

How can a mortgage broker help me get a joint mortgage as a First Time Buyer?

There are lots of things a mortgage broker can help you with. Some key things are that we prepare you to buy a home – by explaining the credit reports for you both, looking at how much you can borrow from multiple banks and saving you from walking into all those banks on the high street.

We support you throughout the whole process and we look at what schemes are available to you. We’ve already touched on Joint Borrower Sole Proprietor – you might be considering buying with your mum or dad or even with your son and daughter. A broker can help you understand whether you’re eligible for those types of schemes.

There’s a lot out there that you might not actually know about. We can help you with so many things.

Approved by The Openwork Partnership on 19/02/2024.

First Time Buyer joint mortgage

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