Bhubaneswar: Buying a home is a dream come true for many. Applying for a loan in this regard is the first step.
One needs to consider the kind of loan one plans to apply for.
A joint home loan allows two or more family members to avail a home loan with shared repayment responsibility.
Most people opt for such a loan to improve their home loan eligibility or reduce the interest cost.
Lenders require applicants to compulsorily add in their co-owners as co-borrowers for properties co-owned by two or more family members.
Advantages of joint home loan:
Here are a few advantages of taking a joint home loan.
Improves loan eligibility: Lenders consider several factors while evaluating home loan applications such as: (i) income, (ii) credit score, (iii) credit profile, (iv) equated monthly instalment (EMI) affordability (v) income of the loan applicant while calculating EMI affordability
It is noteworthy that in such scenario, adding in an earning family member with a good credit score as a co-applicant can enhance loan eligibility.
The head of a popular online finance related website said that adding a co-applicant further reduces the credit risk for lenders.
It is essential to understand that, the co-applicants are equally responsible for loan repayment. Having a co-borrower can also help improve the chances of getting the loan approved.
Higher tax benefits: Repayment of home loan qualifies for income tax deductions. The repayment of interest component of up to ₹2 lakh for self-occupied property qualifies for tax deduction under Section 24B of the Income Tax Act.
Similarly, the repayment of the principal component up to ₹1.5 lakh each financial year qualifies for tax deduction under Section 80C.
Both the primary applicant and co-applicants can independently avail of these tax benefits as per their contribution towards loan repayment.
Adding a co-applicant can help yield higher overall tax benefits say experts.
However adds the expert home loan-related tax benefits shall only be available if they co-own the concerned property.
Disadvantages of joint home loan:
The credit score of the co-applicants in case of non-repayment of EMIs of home loans is equally affected as that of the borrower.
They are equally liable for the timely repayment of the loan.
Issues between the co-applicants can lead to difficulties in repaying the loan, which could impact both borrowers’ credit histories.
Their property could be repossessed by the lender to recover the unpaid dues.
Who can qualify for co-applicant in a home loan:
Lenders usually only allow spouses or other immediate blood relatives of the primary applicant to become co-applicant, but some lenders may not approve joint home loans to siblings or unmarried partners.
Lenders usually require all the co-owners of the property to become co-borrowers of the home loan.
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