Whether to apply for a joint home loan

Whether to apply for a joint home loan

Applying for a joint home loan can come with its own pros and cons. One must not always go for a joint home loan until he understands all the related risks properly and it’s utmost necessary to apply for the same.

There are also some benefits of applying for a joint home loan. Let’s investigate various considerations one must be aware of while applying for a joint home loan.

When to apply for a joint home loan?

Become a joint borrower do not mean that you also the co-owner of the property. It just simply means that you are sharing the liability of the borrowed amount. Even if you are not the joint borrower you can still be a legally joint owner of the property.

By applying for joint home people are often seeking for better borrowing capability. As while applying for joint home loan both of your incomes are combined and then your loan borrowing capacity is calculated.

However, while calculating the cost of the loan, they will only consider the joint applicant who has got a better credit score. Hence it advised, that if you are eligible for the loan amount by yourself, then no need to have a co-applicant.

The joint application can only help if the co-applicant has a good credit history and much stronger than yours.

What are the eligibility criteria for joint home loans?

You cannot have everyone or anyone as a joint applicant for your home loan. It could only be your parents, your brother, or a married wife.

Even siblings can only apply jointly with only a few banks and financial institutions, that too when they co-own the property.

The only brother can be co-applicant. Two sisters are not allowed to be co-applicant in a joint home loan.

Also, the term of joint home loan changes per your co-applicant. If the co-applicants are parent and child, the loan terms would be near to ten years subject to the retirement age of the parent.

If two brothers are co-applicant, then the term for a home loan would be 20 years. It’s best suited for married couples since they co-own the property and the liability to pay. They are also considered as normal under the joint home loan and would have enough loan term of 30 years to repay it.

While applying for a joint home loan, both of you would require submitting your documents like identity proofs and income proofs with your lender with your loan application.

Benefits for applying for a joint home loan.

There are few benefits associated with your joint home loan as below –

Tax Savings

When you apply for a joint home loan, both or all the applicants are eligible for tax savings of around one lakh fifty thousand on the principal amount each per Section 24 of Income Tax Act and an amount of one lakh in the interest being paid into your home loan repayments per Section 80C for each year.

However, to have the privilege of getting a deduction on interest being paid, one must get the possession of the property and it must be a self-possessed property.

Women Joint Applicant Benefits

If you have women co-applicant, then you get all the special benefits that are applicable for women applicants. This includes lesser interest rates on your home loan plus you also tend to save on the registration cost as applicable by law in the state in which you have bought your property.

Things you must be aware of before applying for a joint home loan.

There are some loopholes while applying for a joint home loan. Let’s also understand them under below headers –

Paying Liability

It must be jointly owned responsibility. All the joint owners could have this understanding amongst themselves on how to divide and make the payments. Bank will just need one cheque every month as loan repayment.

Many people tend to have a joint account and tend to submit their share in that account and one of them just signs the cheque. Other ways to make this joint payment is to divide the number of repayments into half and one can make the payments for the first six months and another co-applicant can make the repayments for the next six months.

One more way popular to make such repayments is one candidate makes the payment and other candidates just repays his share of amount to the first candidate.

Remember, if any payments get delayed, or applicants refuse to make the payments due to internal disagreements, then the bank will follow normal court procedure to get the money back and all co-applicants shall be included in that court procedure.

Unforeseen Risks

One must examine his rights and upcoming liabilities before signing on that joint applicant form. Co-ownership is a different thing as per law and is not impacted by being co-applicant in the related home loan.

In case of demise of one of the partner, the law states that his share of the property will go to his decedent and not to his co-applicant in the loan. However, since you are the co-applicant, you are still liable to make the repayments of the remaining loan amount after one of your partners is not there.

It also advised that both the co-applicant get themselves a life insurance to safeguard their partner from their part of liability in the loan amount, in case something happens to them.

Remember, even in the case, you two are separated and divorced by the law still, you have a joint responsibility to repay the loan amount where you two are co-applicants.

The only way to get your name removed from the joint application of home loan is either pay the entire amount of the loan or get it refinanced in the name of one of you who would then be liable for repayment of this new loan.

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