23 October 2020
Mortgage launched to enable children to help parents and grandparents
Buckinghamshire Building Society has launched a reverse joint borrower sole proprietor (JBSP) mortgage to enable children to help their parents, or even grandparents, with their mortgage so that they can remain in their home.
JBSP mortgages have proved hugely popular in recent years. They allow a child to get on the housing ladder with assistance from their parents – the parents’ income is taken into account when deciding how much they can borrow, but they don’t appear on the deeds. The advantage of this is that there is no stamp duty surcharge to pay (parents would normally have to pay 3 per cent on top of the usual stamp duty because they would most likely already own their own home, so this would be deemed a second property).
With Buckinghamshire’s ‘parents supported by juniors’ (PSBJ), the reverse can happen. This is a good bit of marketing from a progressive regional building society as many of lenders already offering JBSP mortgages technically have no restriction stopping applicants taking the reverse position to that normally encountered.
Borrowers who are interested need to bear several things in mind. Firstly, both parties will be assessed by the lender to ensure that criteria is met – credit score, income, credit commitments and so on. So those children who are already over-committed – perhaps with their own big mortgage -may find they can’t help from an affordability point-of-view.
Secondly, both parties are jointly and severally liable for the mortgage payments being paid in full. So if the parents or grandparents miss any payments, then the children are responsible and must pay up. If they do not, this will affect all parties’ credit scores and future access to credit. if the situation continues, the property could be repossessed so all borrowers need to think carefully before committing, as with any mortgage deal.
Finally, the children will not have a legal interest in the property, as they are not named on the deeds. This will mean the aforementioned stamp duty saving but the children will have limited influence, while at the same time being on the hook if payments are missed.
All parties should obtain independent legal advice and consider power of attorney as well. Get in touch with SPF to find out more about mortgage options for older borrowers.