JBSP Case Study – FTB Purchase with a Parents Income

The Client

Ella is a 28 year old marketing manager buying her first home, a £270,000 flat. She had saved a £27,000 deposit (10%) and earned a stable salary of £38,000 a year. She was a genuine first-time buyer, having never owned property in the UK or abroad.

Her father, David, was keen to help Ella buy her first home. He already owns his own home outright and has a comfortable income from employment. He did not want to become a co-owner of Ella’s flat, both because it was to be her home and because he understood that co-ownership could carry tax and estate consequences he would rather avoid.

Related: Helping Your Child Buy a Home: Five Routes, and Why One Often Wins

The Objective

Ella wanted to borrow enough to complete the purchase without waiting several more years to build income and savings. The challenge was affordability. On her salary alone, and after allowing for her existing commitments, a mainstream lender would advance roughly £150,000. Against a £243,000 loan requirement (the £270,000 price less her deposit), that left a shortfall of around £93,000.

The objective was therefore to bridge the affordability gap using David’s income, without David acquiring an interest in the property and without inflating the tax cost of the purchase.

Related: Boosting Affordability Without the Stamp Duty Trap

The Complication

The obvious solution, adding David to the mortgage and the title as a joint owner, would have created two problems.

• Stamp duty. David already owns a residential property. If he went on the title to Ella’s flat, the purchase would count as an additional property for him. That triggers the higher rate for additional dwellings, an extra 5% on top of standard SDLT across the whole price. On £270,000 that surcharge alone is £13,500.
• Lost first-time buyer relief. First-time buyer relief in England requires every buyer on the transaction to be a first-time buyer. Because David is not, Ella would lose her relief entirely, adding further cost on top of the surcharge.

The family needed David’s income to count without David becoming a purchaser of the property.

How We Assessed Her Options

We worked through three routes, comparing borrowing capacity, ownership and the total tax cost of each.

Step 1 – Sole mortgage in Ella’s name

We first tested what Ella could borrow on her own. Even across lenders with more generous income multiples, the maximum fell short of the loan she needed by a wide margin. A sole application was not viable at this price. This route was ruled out on affordability.

Step 2 – Joint mortgage and joint ownership with David

Adding David as a joint borrower and joint owner solved affordability immediately, since his income would be combined with Ella’s. However, because David already owns a home, the purchase would attract the 5% additional property surcharge and Ella would forfeit her first-time buyer relief. The combined tax cost made this route materially more expensive, and it also gave David a legal interest in a property he did not want to own. This route was ruled out on cost and on ownership grounds.

Related: How do joint mortgages work?

Step 3 – Joint Borrower Sole Proprietor (the identified route)

A Joint Borrower Sole Proprietor (JBSP) mortgage separates who is liable for the loan from who owns the property. David joins Ella on the mortgage, so his income is assessed alongside hers for affordability, less his own outgoings and commitments. Ella alone is registered as the legal owner at the Land Registry. David has no ownership interest in the flat.

Because David is not a purchaser of the property, his existing home does not bring the transaction into the additional property surcharge, and Ella keeps her first-time buyer relief. HMRC’s higher-rate test looks at property ownership, not at who is named on the mortgage.

Learn more: JBSP Mortgages

Identifying the Right Route

The JBSP structure met every part of the objective at once:

• Affordability solved. David’s income lifted the combined borrowing capacity comfortably past the £243,000 required, so the purchase could proceed now rather than in several years.
• No additional property surcharge. With Ella as sole owner, the 5% surcharge did not apply, saving £13,500 against the joint-ownership route on this purchase.
• First-time buyer relief preserved. As the only buyer, and a genuine first-time buyer, Ella retained her relief.
• Ella owns her home outright. There is no shared ownership to unwind later, and no complication for David’s own estate.
• A clear exit. Once Ella’s income alone supports the mortgage, David can be removed by remortgaging onto a sole product, subject to the lender’s checks at that time.