We all aspire to own the dream home at some point in our life. Home loans available at attractive interest rates have made buying a house easier; but booming real estate prices, especially in the bigger cities, restrict our choices and though we may buy a house, but not our dream home.
So, what should you do in such a situation? Postpone the decision to buy a house by a few years or settle for the second best option. Fortunately, you do not have to do either. Joint home loan is the easy solution to finance your dream home. Joint home loans allow you to avail higher loan amount as the lending institutes look at the combined repaying power of all the applicants for disbursing a higher loan amount.
Eligibility criteria for Co-applicants
You can apply for a joint home loan to get a higher loan amount but not anyone and everyone can be your co-applicant. Co-applicants can be any of the following combinations:
- Parent – Child
- Immediate blood relatives (brothers, brother-sister)
The maximum number of applicants who can apply for a joint loan cannot exceed 6 and a co-applicant may or may not be a co-owner. Though, lending institutes insist on all co-owners to be co-applicants compulsorily. Co-owner is someone who is also an owner of the property. Thus, all co-owners are co-applicants but all co-applicants may not be co-owners. NRIs can also be co-applicants.
Impact on the Credit Score
When it comes to any kind of loan, credit score is the most deciding factor and joint home loans are no exception to the rule. If all the co-applicants have a good credit score then loan approval at lower interest rates and favourable terms is easy. However, if even one of the applicants has a poor credit score can have an adverse impact on your loan application. Therefore, it is extremely important that all the co-applicants have a good credit score otherwise you may not be able to get the desired loan amount.
Tax benefits in case of joint home loans
The IT Act, 1961 allows each individual home loan borrower to avail tax deduction of Rs. 1.5 lakh under Sec 80C and an additional Rs 2 lakh under Sec 24. So, if case of joint home loans, all co-applicants can enjoy the tax benefits individually. However, such tax benefits can only be allowed if the co-applicant earning member and is a co-owner of the house. The tax benefit is given in proportion to the extent of contribution towards repayment. If you apply for a joint home loan with your wife and she is a home-maker then only you can avail the tax benefits. Apart from this, all co-applicants can also claim the stamp duty and registration charges of the property.
All the co-applicants need to submit the relevant documents required in order to process the loan. KYC (identity and address proof), income proof and bank statements of all the applicants and documents related to property are required by the lending institute for the processing of joint home loan.
Loan repayment is the collective and individual responsibility of all the co-applicants and all are liable to repay the loan. Loan repayment can be made be made by paying the EMI individually or through a joint bank account. The freedom to choose the repayment option lies with the co-borrowers but if any one of them default, then the other co-borrower is liable to pay. Hence, one must be very sure about the repayment schedule and each co-borrower should have insurance to cover their home loan liability in case of unforeseen circumstances.
Taking a joint home loan has several advantages apart from helping you get a higher loan amount; it reduces the burden of EMI and also offers tax-benefits for all the applicants. Thus, joint home loans can be the practical solution to the biggest aspiration of your life.