Purchasing a property or home is one of the significant financial decisions that one has to take as an individual. The decision requires one to consider several factors, such as
- The requirement to purchase a house
- Financial stability post-purchase of a property
- Monthly financial obligations when availing a loan
- Eligibility criteria like credit score etc. if there is a need for a loan
An individual weighs these factors before deciding to purchase a home. Subsequently, the funds required for the same is substantially high and can put a significant financial burden on an individual for the years to come. Therefore, many people now prefer to opt for a joint home loan.
The reason why it is gaining popularity is the benefits that come coupled with it. Here, take a look at the benefits of opting for a home loan jointly.
Benefits of a Joint Home Loan:
- Better Chances of Loan Application Approval
In a joint loan application, the chances of approval increase as eligibility of both candidates are combined as home loan eligibility. Consequently, an applicant with a considerably low CIBIL score can also get approval for a home loan if he/she applies with a co-owner having decent CIBIL score.
It also works the other way round. Like, if a joint loan applicant doesn’t repay his/her part or defaults, then the other may have to repay the whole amount, which will otherwise affect their CIBIL score. It is one of the ways for how your credit score gets affected by a joint loan. Therefore, one should make wise decisions regarding who should be their joint loan applicant.
- Tax Benefits
Co-applicants can separately claim tax benefits on joint home loan they have availed. To do so, they should be co-owners of the purchased property and contributors to loan repayment.
As per section 80C of the Income Tax Act, co-borrowers can claim up to Rs. 1.5 Lakh on the principal amount as home loan tax benefits. Additionally, each co-owner is entitled to claim deductions of up to Rs. 2 Lakh on interest in their tax return for a self-occupied property. Therefore, know the tax benefits on a joint home loan beforehand to maximise the advantages procured from such claims.
- Reduced Repayment Burden
Purchasing a home needs generous funds and availing this hefty amount as housing loan in India can put one in a financial tightrope. However, applying for it with a co-applicant can somewhat reduce your burden. Doing this will help in timely repayment as the equated monthly instalments (EMIs) to be paid will also be divided amongst co-borrowers based on their shared ownership.
Also, the viability of your loan application will increase if there is another co-applicant. In such cases, lending institutions trust your financial credibility more and will lend finances easily.
Who can be your Co-Applicant?
Lending institutions can allow a maximum of six co-applicants for a joint home loan. These co-applicants or co-borrowers must be immediate relatives like parents, siblings, or should be a spouse of the primary borrower. Financial institutions do not allow friends or unmarried partners to be co-applicants for this loan. However, there is no restriction in the co-ownership of the property.
Lending institutions decide the tenor of loan by evaluating age, source and stability of income for both candidates. For example, if a child and parent have applied for a joint home loan and the repayment depends on a parent’s income, then the tenor will be decided based on the parent’s retirement date.
Subsequently, one can avail plenty of benefits by applying for a joint loan while purchasing a residential or commercial property. Also, the approval chances increase because of combined eligibility fulfilment.