Taking A Joint Home Loan? Here’s What You Need to Know
Buying a home is a big milestone, but rising property prices make it challenging to do so on a single income. If you find yourself in a similar situation, a joint home loan may be an ideal option to consider. Typically granted with a spouse, parent, or sibling, a joint home loan can improve your financial profile and boost loan eligibility to help you secure better rates and tax benefits. Also, since the loan is serviced by two applicants, it becomes a shared financial responsibility with legal ownership and long-term commitments. In essence, it is key to manage your finances together to realise your dream of homeownership. So, let’s dive in to understand more about this loan so you can make the right decision. Key Benefits Higher loan eligibility: A joint loan increases your overall borrowing power and loan eligibility as banks consider the combined incomes of both applicants. However, the existing debts of either applicant can affect eligibility, so check your debt-to-income ratios before applying. Dual tax benefits: Both co-borrowers can claim tax deductions of up to Rs 1.5 lakh on principal (Sec 80C) and Rs 2 lakh on interest (Sec 24b) but only if both contribute to EMIs. Flexible loan tenure: Joint loans often allow longer repayment periods which can lower EMIs but increase interest costs. A shorter tenure can, however, save interest costs. Also, compare fixed vs. floating rates before deciding. Shared repayment responsibility: In a joint loan, EMI payments are shared by multiple borrowers, reducing individual financial burden. Having an emergency fund may be recommended though, to manage unforeseen financial setbacks. Property co-ownership: Most banks require co-applicants to be co-owners of the property. This ensures shared asset ownership and clarity on individual stakes. To that effect, having a legal agreement can help avoid disputes. Also Read : PM KISAN Scheme Latest Installment Out Today, Check Eligibility, How To Check Beneficiary List HERE Key Considerations Before Applying Limited co-applicant options: Banks only allow close family members like a spouse, parents, siblings, or children, to become co-borrowers in a joint loan. Friends or business partners are not eligible. Credit scores matter: Lenders assess the credit scores of all applicants when reviewing joint home loan applications. Even one co-borrower’s low score can lead to rejection or higher interest rates. So, it is crucial to improve a weak score before applying. Equal liability for repayment: If one co-borrower defaults on repayment, the other(s) must cover the EMIs. Since missed payments will impact the credit score of all borrowers, it is recommended to have a robust repayment plan prior to applying. Exit process: If a co-borrower exits due to a dispute, divorce, or financial issues, the remaining borrower must prove they can manage the loan alone. Some banks allow replacing the co-borrower and refinancing while selling the property is a last resort. More paperwork & longer approvals: Joint loans require extensive documentation like salary slips, income tax returns, KYC, and property papers for all applicants. As a result, processing can take longer than an individual loan. A joint home loan can make owning your dream home easier, but it requires careful planning. Choose your co-applicant wisely and maintain financial transparency. Don’t forget to prepare for the unexpected. Adopting the right financial approach can help you navigate the process smoothly and become a homeowner. (The author is the DGM Communication at BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)
Buying a home is a big milestone, but rising property prices make it challenging to do so on a single income. If you find yourself in a similar situation, a joint home loan may be an ideal option to consider. Typically granted with a spouse, parent, or sibling, a joint home loan can improve your financial profile and boost loan eligibility to help you secure better rates and tax benefits.
Also, since the loan is serviced by two applicants, it becomes a shared financial responsibility with legal ownership and long-term commitments. In essence, it is key to manage your finances together to realise your dream of homeownership. So, let’s dive in to understand more about this loan so you can make the right decision.
Key Benefits
Higher loan eligibility: A joint loan increases your overall borrowing power and loan eligibility as banks consider the combined incomes of both applicants. However, the existing debts of either applicant can affect eligibility, so check your debt-to-income ratios before applying.
Dual tax benefits: Both co-borrowers can claim tax deductions of up to Rs 1.5 lakh on principal (Sec 80C) and Rs 2 lakh on interest (Sec 24b) but only if both contribute to EMIs.
Flexible loan tenure: Joint loans often allow longer repayment periods which can lower EMIs but increase interest costs. A shorter tenure can, however, save interest costs. Also, compare fixed vs. floating rates before deciding.
Shared repayment responsibility: In a joint loan, EMI payments are shared by multiple borrowers, reducing individual financial burden. Having an emergency fund may be recommended though, to manage unforeseen financial setbacks.
Property co-ownership: Most banks require co-applicants to be co-owners of the property. This ensures shared asset ownership and clarity on individual stakes. To that effect, having a legal agreement can help avoid disputes.
Also Read : PM KISAN Scheme Latest Installment Out Today, Check Eligibility, How To Check Beneficiary List HERE
Key Considerations Before Applying
Limited co-applicant options: Banks only allow close family members like a spouse, parents, siblings, or children, to become co-borrowers in a joint loan. Friends or business partners are not eligible.
Credit scores matter: Lenders assess the credit scores of all applicants when reviewing joint home loan applications. Even one co-borrower’s low score can lead to rejection or higher interest rates. So, it is crucial to improve a weak score before applying.
Equal liability for repayment: If one co-borrower defaults on repayment, the other(s) must cover the EMIs. Since missed payments will impact the credit score of all borrowers, it is recommended to have a robust repayment plan prior to applying.
Exit process: If a co-borrower exits due to a dispute, divorce, or financial issues, the remaining borrower must prove they can manage the loan alone. Some banks allow replacing the co-borrower and refinancing while selling the property is a last resort.
More paperwork & longer approvals: Joint loans require extensive documentation like salary slips, income tax returns, KYC, and property papers for all applicants. As a result, processing can take longer than an individual loan.
A joint home loan can make owning your dream home easier, but it requires careful planning. Choose your co-applicant wisely and maintain financial transparency. Don’t forget to prepare for the unexpected. Adopting the right financial approach can help you navigate the process smoothly and become a homeowner.
(The author is the DGM Communication at BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)
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