Availing of a home loan may not be as easy as it looks from the surface level. Lenders decide on approving or rejecting a home loan application based on the factors, such as credit score, monthly income, employment status, age, and existing debt obligations. If any of these factors don’t fit well with you, then your loan application may get rejected or you may not get favourable conditions on your loan approval.
One way to deal with this situation is to apply for a joint home loan. A joint home loan is nothing but applying for a home loan with a co-applicant.
Who can be co-applicants for a home loan?
- A son and parents
- An unmarried daughter and parents
- Husband and wife
- Brothers
Who cannot be co-applicants for a home loan?
- A minor
- Friends
- Unmarried partners
- Married daughter and parents
- Brother and sister
- Sisters
How having a co-borrower can help your home loan application?
Adding a co-borrower to your application can increase your chances of getting quick approval as it increases your collective eligibility in terms of income and credit score. Remember that the co-applicant will be equally liable for the loan repayment and must be a co-owner of the house.
Since the co-applicant’s income is considered to calculate the loan eligibility, you may avail a bigger loan amount as compared to a single borrower’s case. This is arrived at based on the EMI affordability of the joint income.
Illustrations
Say, you are in your 60s now and you apply for a home loan. Usually, the exit age for a home loan is cut off at 65 years or 70 years of age depending on the lender. Therefore, the lender may want you to finish off your loan in another 5-10 years making the EMI very huge for the borrower. In such a case, adding your son or unmarried daughter as a co-borrower can give you enough repayment time and reduce the EMI considerably.
In another case, if you have had a tough time paying off your previous debts, it would have already affected your credit score. Though your financial situation has improved to a large extent now, your credit report may not permit the lender to provide you with a big loan amount as per your desire. You can add your spouse as a co-borrower to enhance your chances of getting a home loan.
Tax benefits on co-borrowing a home loan
The co-applicants can separately avail income tax benefits for the repayments made towards the home loan based on the contributions each of them has made. That is income tax deduction of up to Rs.2 lakh can be availed on the repayment of interest component for a self-occupied property by both the primary and co-applicant.
The same applies to the repayment of the principal components of up to Rs.1.5 lakh under Section 80C by both applicants. Note that both the applicants must be co-owners of the property to avail of this benefit.
Women applicants get a lower interest rate
Having a woman applicant or co-applicant for your loan can fetch you a discount of five basis points on the loan interest rate. Though it is not too different, you can save a considerable amount over the loan tenure with this difference.
For any clarifications/feedback on the topic, please contact the writer at apoorva.n@cleartax.in
