Income Boost Mortgage
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Income Boost Mortgage
Hemat explains what an income boost mortgage is and how it can help people achieve their property goals.
What is an income boost mortgage and how does this work?
Income boost is where you could have someone else coming onto the mortgage with you, but not owning the property. They could help with the affordability of the mortgage and allow you to buy that property. It’s also known as a Joint Borrower Sole Proprietor mortgage.
What are the criteria requirements for an income boost mortgage?
This kind of mortgage helps clients borrow enough money for a home by letting them add someone else to the mortgage – usually a family member. It could be useful for First Time Buyers, people on low incomes or those moving home.
We would examine the scenario of what you need to do. Let’s say you had a family and you live in a one bedroom flat. You may want to upsize to have another room – but you can’t afford that mortgage. You could then ask mum or dad to come on the mortgage with you to help boost the affordability.
We do ask a lot of questions, because we need to confirm who would be paying the mortgage and the incomes of everyone involved.
How do lenders check affordability?
When you add a family member, or a friend with some lenders to the mortgage you would all be liable for paying it. But only you would own the property and be named on the title deeds. That person is called the owner borrower. The family member or friend is the non-owner borrower.
It works in the same way as a standard mortgage. We ask both applicants for their income documents, credit reports and bank statements and we would do the affordability checks. We also check eligibility – as not all lenders do this type of mortgage.
Can you give an example of how it works?
Let’s imagine a customer, George, who wants to buy his first home. George earns £30,000 and needs a £150,000 mortgage. The maximum loan he might be offered would be around £110,000 – which is £40,000 short.
George’s mum earns £60,000 and she is happy to go into the mortgage with him as a Joint Borrower Sole Proprietor. She would not live in the property with George and would not own it. She would have a mortgage-free property herself. By adding mum on, George could now get the £150,000 mortgage. It means he could buy his first home.
They’re both liable for the mortgage payments and named on the mortgage. George’s mum would need to be very sure that he would pay the mortgage. Only George would own the property.
We always ask a secondary question – would mum contribute to part of the mortgage? Technically, George isn’t able to afford the mortgage on his own and that’s why lenders limit the borrowing amount. That’s a conversation George and his mom would need to have.
Mum would also need independent legal advice to check she knows what she’s doing. She’s going on a mortgage, won’t own any of that property but would still be liable for that loan if George did not pay.
That’s why lenders would get solicitors involved to ensure that George’s mum has had the right advice. If things go wrong, she would be liable to pay the mortgage, and if not, her credit score would suffer. We make sure people understand that. We never want anyone to have any nasty surprises.
Can you get an income boost if you have bad credit?
Yes, you can. There are lenders that take all different forms of credit profile. When we’re applying for the mortgage, we would ask you for these details as part of the research.
We would confirm whether you would be eligible with those lenders or not. Just let us understand your credit situation and we would be able to advise you accordingly.
Can you get an income boost on a Buy to Let mortgage?
Yes, there are some niche lenders that would allow that. We’ve recently had some First Time Buyers that are comfortable living at home. They’re not planning to move out but they want to invest in property.
We could do a First Time Buyer Buy to Let on a Joint Borrower Sole Proprietor basis. At the time of recording in February 2024 a couple of lenders would do that.
Lenders sometimes change their criteria and the goalposts, so it’s always best to speak to us. Let us understand your circumstances and advise you accordingly.
Is there anything I need to be aware of when I come to remortgage my property on an income boost mortgage?
We might be using this type of mortgage to borrow some extra funds for a particular purpose. You might own the property by yourself right now, but you need to borrow some extra money. Mum and dad might agree to come onto a mortgage with you to borrow that additional amount. It works exactly the same way.
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It doesn’t cost anything for a chat, it’s free and we never charge a fee until we’ve got a mortgage offer. So pick up the phone and let us take it from there.
Do you pay stamp duty with an income boost mortgage?
I have to be careful because I’m a mortgage and protection adviser, not a solicitor and I don’t give stamp duty advice. For specific information you would need to consult a licensed solicitor or conveyancer or go on to the UK government website to confirm that.
Typically though, for a First Time Buyer on a Joint Borrower Sole Proprietor mortgage, stamp duty would be at First Time Buyer rates. The stamp duty would be based on the owner borrower. The non-owner borrower’s circumstances won’t come into play when calculating the stamp duty. But again, check and confirm with your licensed solicitor.
What are the pros and cons of an income boost mortgage?
We demonstrated the pros in the earlier example, where George could now buy a house he couldn’t otherwise afford. It allows you to get the mortgage you need to purchase your ideal home.
In terms of the cons, let’s say that two years down the line he might need to remortgage and George’s mum wants to come off. He could be stuck there – because he has got to be able to afford the mortgage on his own for George’s mum to come off.
George’s mum might also be stuck. She might need to remortgage her own place, but because she’s got this commitment with George she can’t do what she needs to do.
You might not be able to remortgage away to a different lender either, if other lenders won’t lend you the amount that you need. You’re limited to lenders that do Joint Borrower Sole Proprietor mortgages.
How do you apply for an income boost and how can a mortgage broker help?
Typically you just come to us and tell us what you want to do. Usually when we get these mortgages, it’s started with a customer coming to us where we’re not able to get them the property that they want. We would then ask if someone might be willing to come on the mortgage to help with the affordability.
Not everyone has the luxury of being able to add someone as a non-owner borrower. There’s a lot of liability on that person.
We always check that the owner borrower is able to repay the mortgage – because homes may be repossessed if you can’t keep up to date with your monthly payments. We also do budget planners to make sure everything’s sensible and things are going to be OK.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.
Hemat Natha, trading as Mortgage Advice Point, is an Appointed Representative of HL Partnership Limited which is authorised and regulated by the Financial Conduct Authority.
A fee for our service is charged. This is typically £495 but the exact amount will be dependent upon your circumstances and we will discuss this with you.
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