With property prices on the rise, purchasing a home today has become quite challenging. However, with banks and lenders making the process of availing a home loan a lot easier in recent times, affordability has improved significantly.
However, your home loan eligibility depends on several factors such as age, income levels, and other existing loans which you are yet to repay. Banks and lenders consider your home loan EMI combined with all other EMIs, that you might be still repaying, and calculate if this does not exceed a certain level of your disposable income or your take home income.
The option of joint home loan is worth considering as it will not only increase your eligibility to a get a higher loan amount but will also help you share the debt-burden as the income of the co-borrower will be evaluated before the loan is extended to you. Here are some of the advantages and benefits of choosing a joint home loan.
What parties can be a co-borrower?
Before we dwell into the benefits of a joint home loan, let’s understand who is eligible to be a co-applicant of a joint home loan.
- Blood relatives such as parents and siblings
- Brothers (provided both are owners of the property)
Advantages of a Joint Home Loan
There are several advantages while choosing a joint home loan, below are the benefits when you choose a joint home loan versus a single-applicant home loan.
- Higher Loan Amount: Banks and lenders consider the co-applicant’s net income along with your income, which reflects the total income between the both of you. This results in extending a higher loan amount and probably a step up to a bigger a house than previously considered.
- Lower Interest Rate: Some banks or lenders offer a lower interest rate on a joint home loan if the co-applicant is a female as there are further tax exemptions under the Income Tax Act.
- Lower Burden: With more than one borrower, the loan repayment or the EMI can be divided amongst all thereby lowering your burden.
- Tax Benefits: The co-applicant of the joint home loan can also claim deduction under the Income Tax Act against the interest repaid under Section 24 and against the principal repayment under Section 80C.
- Stamp Duty Benefits for Women: Several states in India offer partial waiver in stamp duty for women buyers either as a sole owner or as a joint owner.
What is the documentation process for a joint home loan?
The documentation process for availing a joint home loan is like that of a home loan. Co-borrowers are required to submit know-your-client (KYC) details such as identity and address proof along with income proof and the proof of co-ownership of the property along with other property related documents.
Repayment Process of a Joint Home Loan
The process of repaying a joint home loan by two different individuals is simple and convenient. The EMI can be paid through a single or a joint account either by cheque or electronic clearing system (ECS). Co-applicants can also share the EMIs between them and they could decide the number of cheques to be issued by one applicant and the remaining can be paid by the other applicant. If there’s a default in the payment of EMIs then banks or lenders will follow the due course of loan recovery against all borrowers.
Key Aspects to Consider Before Taking a Joint Home Loan
Before you enter into an agreement with another individual to take a joint home loan, there are several aspects that you need to consider. The below factors enable you to take caution before you begin the process of a joint home loan with a bank or a lender.
- The co-borrower may not be the co-owners of the property; however, most banks and lenders insist that all co-applicants are co-owners of the property. Also, it may be noted that if the co-applicant is not an owner of the property then they will not be able to claim deduction under the Income Tax Act.
- All co-applicants are liable to repay the home loan. Default in payment by any one of the applicants, banks and lenders follow the due course of loan recovery on both the applicants. Also, both the applicants’ credit score will take a hit. It’s important that there’s a clear understanding between joint loan borrowers to avoid any issues in the future.
- Applicants should ideally take separate term life insurance to reduce financial burden in case of the demise of the other applicant. This will also help when there’s a financial burden in the family by enabling to cover the asset.
In conclusion, joint home loans are becoming a convenient and a practical option for borrowers. It offers the benefit of owning a larger or better home coupled with reducing the overall cost of the home by availing tax benefits. Additionally, by sharing the responsibility in servicing the loan, it reduces the burden of the loan repayment. Joint home loan is an effective tool to reduce the overall cost of owning a dream home. These key benefits will certainly bring higher bargain while choosing a home loan; however, ensure you’re are financially stable and review your future before you take the decision to buy your dream home.