A joint home loan has more than one applicant. Their combined income is taken into consideration while the leader processes their loan application.
This increases the chances of loan approval and can get you a larger amount as loan.
A Few Things to Remember as Joint Home Loan Applicants
When you apply for a joint home loan, it may help ease the process and also provides additional benefits. It can also have its downsides. So, consider the following points carefully before you proceed with your home loan application:
- There are certain rules concerning the Home Loan Eligibility of joint applicants:
- Siblings are not considered ideal joint home loan applicants
- If brothers co-apply for a loan, the lender may consider their application if they are co-owners of the property
- Sisters as co-applicants are generally rejected as lenders doubt whether they will keep up with the repayment schedule after marriage
- If a parent and sons apply for a loan, the lender wants the parent to be owner of property to avoid disputes
- If a parent and one son or daughter are co-applicants, the lender would prefer the child (son or daughter) to be the owner of the property
- Spouses applying together have the best chance of getting loan approval for a joint home loan
- So, a husband and wife who are both earning an income can ideally apply for Joint Home Loan and share the burden of repayment
- Home Loan Documents
- Documentation requirements have to be fulfilled for each individual co-applicant
- You should each submit KYC documents like ID proof, address proof, and age proof
- You should each provide individual proof of income
- You should also ;provide proof of ownership of the property
- Home Loan Repayment
- Each co-borrower is responsible for making his/her contribution towards the repayment of the loan
- Banks do not accept cheques from different sources for each EMI
- So, co-borrowers after having the proper home loan EMI calculation can make an arrangement such that each of them makes the payment for a set of EMIs according to their share in the loan
- If one co-borrower defaults then the others have to keep up with the defaulter’s share of the EMI payments
- To provide clear proof of individual contribution towards repayment of loan, it is better to draw up a written loan repayment sharing agreement
- Take term covers on each co-borrower to offset risk of default on repayment due to death or disability
Joint Home Loan Benefits
- It increases the chances of loan approval
- The combined income of co-applicants can get you the expected amount as loan for purchase of a large house
- It can help offset bad credit score of one applicant, if the other has a good credit rating
- It splits up the burden of EMI payments as each co-borrower pays their share
- It can give you additional tax benefits if you are making large EMI payments
Home Loan Tax Benefits for joint loan applicants:
- To avail tax benefits, you must also be co-owner of the house, not just co-borrower
- You share the tax exemptions in proportion to your contribution towards the repayment
- You can each claim upto Rs. 1.5 lakhs as exemption on the principal amount repayment you have contributed to per annum
- On your contribution towards the interest component of the repayment, you can claim upto Rs. 2 lakhs per annum under Section 24 of the IT Act
There are numerous advantages in taking a joint home loan, despite the risks involved in default of payment by one or more co-borrowers.
Consider your relationships, your financial status, your share in the property, and other factors carefully before making a commitment towards a joint loan. If you decide to co-apply for a loan, you can enjoy many benefits like less strain on your individual monthly budgets, and tax benefits.