The Benefits And Drawbacks Of A Joint Home Loan
Source: Times Property https://bit.ly/3RUiHTW
If you are planning to take a home loan, you can do so jointly with another co-borrower. Most banks in India have specific joint home loan applicant rules that only close relatives can borrow a housing loan together, mainly spouses, parents with son, unmarried daughter with parents, and brothers who live together. A sister-sister, sister-brother, parent with a married daughter, friends, cousins, unmarried couple combinations are not eligible to be joint applicants for a housing loan. Also, to apply for a joint home loan, from a minimum of two applicants to a maximum of six applicants is allowed.
Rules for a co-applicant
To apply for a joint home loan, you are required to know a few key things. There’s a main applicant and a co-applicant. Here, too, there are two types of co-applicants: one whose income is not included during the calculation of the home loan eligibility, and the other whose income is included. This means, even if one of the co-applicants — for example, a retired parent — does not have an income, you can still avail a home loan jointly. It’s not necessary for all co-applicants to be owners of the property to be eligible. However, if you and your spouse are co-owners of the property, which requires the home loan, some banks mandate that co-owners should be the co-applicants of the loan as well.
Benefits of a joint home loan are:
A large number of borrowers prefer to apply for a joint home loan.
The advantages of applying for a joint home loan include:
Higher loan amount
If the joint income of all applicants is included during the calculation of the home loan eligibility, it makes you strong candidates for a higher loan amount to be sanctioned because of your enhanced repayment capacity. It also means you can choose a longer repayment tenure.
Purchase of a bigger home
The higher the loan amount, the better is your financial capacity to buy a bigger home.
By taking a joint home loan with many co-applicants, who have a steady income, means that you all share the responsibility of repaying the loan together.
Greater tax benefits
Most co-applicants factor in the tax benefits they can enjoy if they borrow a home loan jointly, especially if they are co-owners too.
Special interest rates for women co-borrowers
Banks and housing finance companies offer a considerably lower home loan interest rate for women.
Drawbacks of a joint home loan are:
A joint home loan, too, comes with its share of disadvantages which you must scrutinise before you apply for one.
In the unfortunate event of any applicants losing their source of income, inability to repay the share of the EMI due to an accident or financial crisis, etc., the burden of loan repayment will fall on the others who will have to increase their share of payment of the EMI amount.
Default on payments
If any of the applicants are unable or refuse to pay the EMI amount, it can hugely affect your collective credit score. This can then jeopardise your chances of availing another loan, probably for a vehicle, higher education or even another property.
Divorce or separation
Since all the applicants are liable to repay the home loan collectively, in the event of a divorce or legal separation, where both are joint applicants, and one of them refuses to pay their share of the EMI, the spouse or the rest of the co-applicants will have to share the responsibility of repayment.
Death of a co-borrower
In the event of a co-applicant’s death, the burden of repaying the deceased’s share will be transferred to the surviving applicant/s. And if the surviving applicant is unable to repay the loan, the lender has the legal right to seize the property. Also, after a spouse’s death, the surviving spouse is eligible for only one third of the share of the property for which the loan has been borrowed. The rest is shared among the deceased’s parents and children.