Thinking of joint home loan? 6 facts you should know

Home buying is both an overwhelming and a satisfying decision. These days home buying is enabled by home loans in most cases, unlike earlier days where people used to save up money for years before they bought a home. Your home loan eligibility can go up substantially if it is a joint home loan, which might help you in buying a bigger or better house. We tell you all you need to know about joint home loans.

Home loan eligibility is not the only benefit of taking your home loan with your family member. There a number of other benefits as well as some limitations to borrowing money together. Since there is no much material available on this subject, we have put together a fact sheet on taking a joint home loan.

Following are the 6 most important facts of joint home loans:

1. Co-Applicants’ definition: This is the most common question one asks. A co-applicant is the person who jointly takes a loan along with you. It is important to understand the difference between a co-applicant and co-owner. A co-owner includes all the owners of the property. Banks insist all the co-owners be co-applicants necessarily. . Hence, all co-applicants may not be co-owners but all co-owners have to necessarily be co-applicants. A co-applicant can be your spouse, parents, siblings or son.

2. Paperwork: In case of a joint home loan, both the applicants require to submit all documents required for processing the loan such as, Permanent Account Number (PAN) card copy, address proof, income proof, bank statements and documents relating to the property.

3. Increase in loan eligibility: This is one of the biggest benefits of joint home loan. The lenders will consider the income of all the applicants thereby increasing the loan eligibility value.

4. Repayment liability: When you are a co-applicant in the loan, the lenders make you also liable to repay the loan amount. So the responsibility of repaying the loan is on the shoulder of the co-applicant as well. If one of the borrowers fail to pay, the responsibility of footing the equated monthly installment (EMI) automatically shifts to the other borrower.

5. Tax benefits: Now when you are equally responsible for repaying the loan, it is but logical that you get to enjoy the tax benefits as well. Under section 80C of Income Tax Act (IT-Act), a home loan borrower is eligible for tax benefit of principal repayment of up to Rs 1 lakh and Rs 1.5 lakh of interest repayment under section 24 of the same act. In case of a joint home loan, both the applicants are eligible to enjoy these benefits proportionate to the extent of contribution towards repayment.

6. Cibil score: This is the most important part in the case where you are considering higher loan eligibility as the main reason of availing a joint home loan. If all the applicants in a joint home loan have a good Cibil score, then it’s a cake walk to get a loan approval. If the one of the applicants has a bad Cibil score then the lenders do not consider his/her income to increase eligibility, but the lenders do make exceptions in certain cases. Considering the income of a person who has a bad Cibil score is completely at the discretion of the lender.

So, it is important to understand that joint home loans do come with a great deal of benefits along with proportionate liabilities. So if you want to enhance your loan eligibility, approach your blood relatives but make sure you have a clear strategy to repay back the higher loan amount on time.

Rajiv Raj, Director & Co-Founder, creditvidya.com

The views expressed in this article are author´s own