The struggle to get on the property ladder is well-documented, especially for those buying their first home. House prices are high, so even with a good income it can be hard to save for a deposit or get a large enough mortgage without support.
That’s where a family boost mortgage might help. It’s a way for family members to support the borrower.
However, it’s really important to be aware that the term ‘family boost mortgage’, along with similar phrases, can mean different things.
What is a family boost mortgage?
Usually when lenders use the phrase ‘family boost’ they mean a joint borrower sole proprietor (JBSP) mortgage.
A JBSP mortgage is designed to help someone purchase a home with help from a close family member. This could be a parent or a grandparent, for example. The family member helps with the mortgage using their income, but they don’t own any part of the home.
With this type of mortgage, multiple people are named on the mortgage agreement. However, only one or some of the borrowers are named on the property deeds. Those named on the deeds are known as the proprietors, which means they are the legal owner/s, and the family helper doesn’t have a share in the property itself.
Here’s an example
For example, a son and his partner purchase their first home with help from the son’s mum and dad. The son and his partner are the proprietors and have sole ownership of the property. However, all four of them are named on the mortgage for affordability purposes.
Stamp duty
Only the stamp duty status of the proprietors (or legal owners) is used. So, in the case above, the son and his partner will keep any first time buyer stamp duty discount. Also, even though his parents own a home already, there is no additional property stamp duty to pay.
Joint Borrower Sole Proprietor Mortgages (JBSP)
Many banks and building societies have launched JBSP mortgages. Confusingly, they do not all use the same name for what is a very similar product.
Some other commonly used product names are:
- Booster mortgage
- Mortgage Boost
- Family Boost Mortgage
- Income booster mortgage
- Joint Borrower Sole Proprietor
- JBSP
- Mortgage Boost
As more lenders start to offer this type of mortgage, the list of product names may grow too.
Other ways the word ‘Boost’ is used
It can be confusing, but ‘mortgage boost’ is also used to describe some other types of products too. For example, a mortgage that involves the borrower not needing to put down a deposit. Sometimes, a family member puts a percentage of the property’s value into a savings account as security.
In addition, some builders and developers offer what they call a ‘deposit boost’. This helps to make their new-build properties more attractive to first time buyers. While this is not a mortgage it can add to the confusion around the term ‘boost’.
What are the rules around family boost mortgages?
We’ll take a look at JBSP mortgages, as that’s the type of mortgage most ‘family boost’ terms refer to.
Each lender will have a slightly different set of rules about who they will lend to. This is known as their ‘criteria’.
For example, at Suffolk Building Society, we’ll accept up to four applicants and up to four incomes from a maximum of two households. For expat applications, we can accept two borrowers in total. Our criteria is subject to change.
You can find more details about our family boost mortgage on our joint borrower sole proprietor mortgage page.
Why choose this type of mortgage?
There are a few reasons why a family boost / JBSP mortgage could be the right choice.
It helps many people get on the property ladder earlier than they might on their own. With the support of a family member, it’s often possible to borrow more and find a more suitable home.
Secondly, in most instances, it allows family members to help without needing to give a large cash gift. Not everyone has spare savings, but they may be able to support monthly payments or use their income to strengthen the borrower’s application.
And, because the supporting borrower isn’t listed on the property deeds, it avoids complications like additional stamp duty charges or future Capital Gains Tax.
What happens if family circumstances change?
Just like any other mortgage, a family boost mortgage is a long-term commitment.
It’s not possible to simply remove any of the borrowers should they no longer wish to be named on the mortgage. The remaining borrowers would need to reapply for the mortgage. With fewer borrowers, it might affect affordability. Plus, there are no guarantees that the mortgage lender will accept the new application.
Should anyone on the mortgage die, the remaining borrowers would become responsible for the mortgage payments. It’s therefore important to think through any eventualities.
When taking out a mortgage with family members, it’s crucial that everyone fully understands their obligations. That is both to the mortgage lender and to each other.
Doing your due diligence
Given current house prices, family boost / JBSP mortgages can be a practical solution to help more people onto, and to stay on, the property ladder.
It’s essential, however, that borrowers remain aware that definitions of this type of mortgage can vary. Search engines, like Google and Bing, don’t yet know that these products are similar but not the same. So, it’s worth checking that you’re finding what you really want
If in doubt, seek the expertise of a mortgage broker or solicitor. They can ensure that you’re getting up-to-date advice and that you understand the products that are available.
