Home is where the heart is, goes an old English idiom. Indeed, for many of us, our homes will always be the place for which we feel the deepest affection, no matter where we are.
A home is also one of the most important assets that we invest in our lifetime. Given the high real estate rates in most urban centres across the country, buying a home may be capital-intensive. Some of us may have actually faced a situation where the approved loan amount by a financial institution has fallen way short of the price of that dream home.
So, is there a way how one can avail of a higher amount of home loan ? The solution is simple. Apply with a co-applicant for a home loan. With this, you can significantly increase your chance of getting a bigger loan as by combining incomes, the total revenue into consideration gets enhanced and even the repayment capacity surges. But remember, while all co-owners should be co-applicants for the home loan, not all co-applicants need to be co-owners.
Now, the pertinent question arises as to who the prospective co-applicants for home loans can be. In the Indian context, a married couple, a father and son duo (where the son is a primary owner in case of multiple heirs) or a father and unmarried daughter duo (where the daughter is the primary owner), brothers (in case of co-owned property) and businessman/woman along with his/her company can be co-applicants.
So, what are the benefits of a joint home loan, and why should you opt for it? Read on to learn more!
Must Read 6 Benefits of Joint Home Loan
Increase in Loan Eligibility
The loan is sanctioned after the repaying capacity of the applicant/s is assessed based on income. By adding the income of the co-applicant, an individual can avail of a larger loan.
Learn About: How to improve your home loan eligibility
Get a Bigger Home
With the eligibility increasing significantly, the chances of buying that dream home can come close to reality. For instance, Rahul earns ₹50,000 per month and applies for a home loan but is only eligible for ₹40 lakh. By adding his wife, Priya, who earns ₹45,000 per month, their combined income increases the loan eligibility to ₹75 lakh, helping them to buy a bigger and better home.
Shared Responsibility
When you add a co-applicant for your home loan, you share the responsibility for paying back the loan. This helps foster a shared sense of ownership and reduces the economic burden on an individual.
Tax Benefits
Your co-applicant and you are also eligible for income tax rebates up to Rs 1.5 lakh each on repayment of the principal under Section 80C, and up to Rs 2 lakh each under Section 24 of the Income Tax regulations. It’s important to note that the tax benefit of both the deduction on home loan interest and principal repayment can only be claimed once the construction of the property is complete. It is advisable to consult your tax consultant or financial advisor for detailed information and advantages
Transfer of Ownership
Apart from the above benefits, joint property ownership leading to a joint home loan eases the process of transferring ownership in favour of the co-applicant (who is a co-owner, too) in any unforeseen event. Take Kavita’s example. She and her father jointly owned a property. Unfortunately, her father passed away, but since she was a co-owner, the ownership transfer was easy without additional legal hassles.
Benefit in Stamp Duty Charges with Female Co-Applicant
Many may not be aware that some states offer a reduction in stamp duty charges if your co-applicant is a female. For example, in Delhi, if the applicant is a woman, the stamp duty is levied at 4%; for married couples, it is 5%, and for single men, it is 6%.
Must Read: Check Your Home Loan Eligibility
Wrapping Up
A joint home loan is a strategic way to enhance loan eligibility and ease financial burdens by sharing repayment responsibilities. It also provides legal and financial security in case of unforeseen circumstances. However, it is essential to choose a financially stable co-applicant and maintain a strong credit profile to avoid potential loan approval issues. Contacting a financial institution like PNB Housing can help maximise benefits, making joint home loans a practical choice for homebuyers looking for long-term financial stability.
FAQs
Can a joint home loan improve my loan eligibility?
Yes, a joint home loan improves your eligibility as the lender considers both applicants' incomes, increasing the total amount you can borrow. A higher repayment capacity means you can qualify for a larger loan, making it easier to buy a more expensive property.
What happens if one co-applicant is unable to repay the loan?
If one co-applicant defaults, the other applicant is legally responsible for repaying the entire loan. Non-payment can lead to penalties, legal action, or property seizure, depending on the loan terms. It's advisable to have loan insurance to mitigate risks in case of unforeseen financial difficulties
Will both co-applicants' credit scores be affected by the loan?
Yes, the credit score of both co-applicants is impacted. If EMIs are paid on time, both scores improve. However, missed or delayed payments negatively affect both applicants, reducing their future borrowing capacity. Ensuring timely repayment is crucial to maintaining a good credit score for both borrowers.
