Income Boost Mortgage – what is it and How Does it Work?
An Income booster mortgage allows you to have someone else join the mortgage without owning the property, enhancing affordability and enabling you to buy a home. This arrangement, known as a Joint Borrower Sole Proprietor mortgage, means the additional person helps with the mortgage affordability but does not hold any ownership of the property.
Criteria for an Income Boost Mortgage
This mortgage type allows clients to borrow sufficient funds for a home by adding another person, typically a family member, to the mortgage. This can be particularly beneficial for first-time buyers, individuals with lower incomes, or those looking to move to a larger home. For example, if you need to upsize from a one-bedroom flat but can’t afford the mortgage, you could ask a parent to join the mortgage to boost affordability.
Lenders will ask many questions to confirm who will be paying the mortgage and the income levels of everyone involved.
How Lenders Check Affordability
When you add a family member or friend to the mortgage, you all become liable for the payments, but only you will own the property and be named on the title deeds. The owner borrower holds the property ownership, while the non-owner borrower helps with the mortgage payments.
Lenders will request income documents, credit reports, and bank statements from both applicants and perform affordability checks. They will also assess eligibility, as not all lenders offer this type of mortgage.
Availability of Income Boost Mortgages
As of February 2024, there are 35 lenders offering Joint Borrower Sole Proprietor mortgages, while 41 lenders do not offer them due to various reasons. This type of mortgage requires specialist advice due to its complexity.
Example of How it Works
Consider George, who wants to buy his first home but falls short by £40,000 for the required £150,000 mortgage. His mother, earning £60,000 and mortgage-free, agrees to join the mortgage as a Joint Borrower Sole Proprietor. This arrangement allows George to secure the mortgage and buy his home. Both George and his mother are liable for the mortgage payments, but only George will own the property.
Can You Get an Income Booster Mortgage with Bad Credit?
Yes, some lenders accommodate various credit profiles. Your eligibility will be confirmed during the application process, taking into account your credit situation.
Income Boost Mortgages for Buy-to-Let
Some niche lenders offer Joint Borrower Sole Proprietor arrangements for buy-to-let mortgages, particularly for first-time buyers who wish to invest in property while living at home.
Remortgaging with an Income Booster Mortgage
If you need to borrow additional funds, you might consider asking a family member to join the mortgage. This process works similarly to securing an initial mortgage, but it involves additional legal and financial considerations.
Stamp Duty and Income Boost Mortgages
For specific stamp duty advice, consult a licensed solicitor or conveyancer. Generally, for first-time buyers on a Joint Borrower Sole Proprietor mortgage, stamp duty is based on the owner borrower’s circumstances.
Pros and Cons of an Income Boost Mortgage
Pros: This mortgage allows you to purchase a property you otherwise couldn’t afford. For example, George can buy a house with his mother’s help.
Cons: If circumstances change and the non-owner borrower wants to exit the mortgage, the owner borrower must afford the mortgage independently. Additionally, the non-owner borrower might face limitations in securing other loans due to their involvement in this mortgage.
Applying for an Income Boost Mortgage
Typically, you start by consulting with a mortgage broker. If adding someone to the mortgage is a viable solution, the broker will guide both parties through the process. This includes a thorough interview with the non-owner borrower to ensure they understand their obligations.
In some cases, friends might group together, with one person owning the property and others joining the mortgage. This setup requires careful consideration and legal advice.
Important Note
Always ensure that the owner borrower can meet the mortgage payments to avoid the risk of repossession. A mortgage broker will help with budget planning to ensure the arrangement is sustainable.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.