Should you opt for a joint home loan?

[ecis2016.org] We look at who can be added as a co-borrower in a joint home loan, the liability of each borrower and the pros and cons that one should consider before opting for such a loan

Banks and housing finance companies are generally more willing to lend loans to couples who apply for the loan in joint names. Moreover, a single home loan applicant may not get the same amount, as joint home loan applicants. As soon as you get a co-applicant, the combined borrowing potential increases your eligibility. While there are numerous benefits one gets from a joint home loan, one should also consider the challenges that might come along.

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Who can be co-applicants in a home loan?

While working spouses are the banks’ most favoured joint home loan co-applicants, financial institutions also grant loans to an applicant along with their parents. There could be some cases, where they would allow siblings a joint home loan. However, banks have reservations about granting loans to applicants who include their sisters as co-applicants. Also, live-in partners and friends would typically not get their joint home loan applications approved.

Benefits of joint home loans for banks

A co-applicant significantly boosts your chances of getting a higher loan amount. You could get up to 90% of the transaction value as loan, if you apply in joint names. Otherwise, typically, the borrower has to pay 20% of the deal amount as the upfront amount.

Read also : What is a release deed?

Home loans are already secured, because banks have the property as collateral, in case the borrower cannot pay up. A joint home loan lowers the chance of things coming to such a state, as both applicants have to give the ECS mandate of their respective bank accounts, for the deduction of the EMIs.

In a joint home loan, two people are responsible for servicing the loan. If one is unable to pay up, the other would.

Joint home loan benefits for borrowers

Interest rate on joint home loans

If the prevailing interest on home loans is 8%, a working couple can negotiate with the bank for discounts on this amount. If they are able to negotiate well, they can get a discount of up to 50 basis points. In case the woman is the main applicant, rates would be lower, as several lenders offer lower rates for women borrowers.

Tax benefits on home loans for co-applicants

In case of joint home loans, the co-applicants can individually claim tax benefits on their annual income, on the same home loan. This results in significant savings.

[ecis2016.org] All about home loan tax benefits

Points to consider before taking a joint home loan

Read also : Section 80EE: Income tax deduction for interest component on home loan

In case you have made up your mind to go for a joint home loan, here are certain factors to consider:

• If a couple has taken a joint home loan and the husband passes away in the middle of the repayment term, then, the entire responsibility of repaying the loan would fall on the wife. However, when it comes to ownership, the property will be divided between the mother and children, along with the wife of the deceased.
• A wife, who is only a co-applicant and not a co-owner, basically bears the responsibility for the loan without being the real owner of the property. Unlike the popular belief, women do not really have 50% share in their husband’s self-acquired property.

[ecis2016.org] Impact of divorce on a property under joint ownership

• It is difficult to exit from a joint home loan. Hence, a borrower should opt for a joint home loan, only if he or she is entirely sure of the move.

Also read: Who claims capital gains on joint property

How many people can for a joint home loan?

Not more than six people can apply for a joint home loan.

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