Home buying is both an overwhelming and a satisfying decision. It is enabled by home loans in most cases, unlike earlier days where people used to save 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 home loan with your family member. There are a number of other benefits and some limitations as well on borrowing money together. Since there is not 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:
Co-Applicants: What is the definition of Co-applicant? 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 a co-owner. A co-owner includes all the owners of the property. Banks insist that all co-owners be necessarily co-applicants. 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, parent, sibling or child.
Paperwork: In case of a joint home loan, both the applicants have to submit all documents required for processing the loan such as, copy of Permanent Account Number (PAN), address proof, income proof, bank statements and documents relating to the property.
Loan eligibility: Increase in the loan eligibility is one of the biggest benefits of a joint home loan. The lenders will consider the income of all the applicants thereby, increasing the loan eligibility value.
Repayment liability: When you are a co-applicant, the lender also makes you liable to repay the loan amount. So, the responsibility of repaying the loan is also on the shoulder of the co-applicant. If one of the borrowers fail to pay, the responsibility of footing the equated monthly installment (EMI) automatically shifts to the other borrower.
Tax benefits: 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 the Income Tax Act (IT-Act), a home loan borrower is eligible for tax benefit of the principal re-payment of up to Rs 1 lakh and Rs 1.5 lakh of interest re-payment under Section 24 of the same act. In case of a joint home loan, both applicants are eligible to enjoy these benefits proportionate to the extent of contribution towards re-payment.
Cibil score: This is the most important part 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 is a cake walk to get the loan approval. If 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 the higher loan amount on time.
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