May 19th, 2017

Tips on applying for a joint home loan

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 is quite capital intensive. Some of us may have actually faced the 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 larger home loan? The solution is simple. Apply for the loan jointly with a co-applicant. With this, you can significantly increase your chance of getting a bigger loan as by combining incomes, the total revenue into consideration enhances 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.  Moreover, for a smooth transaction, ensure that your co-applicant has a good credit score, as a low score of even one applicant will adversely affect the combined credit score. It is also advisable for the co-applicant to have a separate nsurance to reduce the financial burden in case of any unfortunate incident or sudden demise of any applicant.

Now the pertinent question arises that who can be the prospective co-applicants for home loans. In the Indian context, married couple, father and son (where son is primary owner in case of multiple heirs) or father and unmarried daughter (where daughter is the primary owner), brothers (in case of co-owned property) and businessman/woman along with his/her company can be co-applicants.

In a joint home loan, the benefits can be many, like:  

Increase in loan eligibility: Loan is sanctioned after assessing the repaying capacity of the applicant/s based on the income. By adding the income of the co-applicant, an individual can avail of a larger loan.

Get a bigger home: With the eligibility increasing significantly, the chances of buying that dream home can come close to reality.

Shared responsibility: When you add a co-applicant for your home loan, you share the responsibility for paying back the home loan. This helps foster a shared sense of ownership and reduces the economic burden on the individual.

Tax benefits: Your co-applicant and you are also eligible for income tax rebate up to Rs 1.5 lakh each on repayment of principal amount of home loan 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 a more 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 other applicant (who is a co-owner too) in any unforeseen event.

Benefit in Stamp Duty Charges with female co-applicant: Many may not be aware that some states offer a reduction in stamp duty charges in case 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%.

By Shaji Varghese, Business Head and General Manager, PNB Housing Finance Limited

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