A joint home loan is a housing loan taken by more than one person to increase home loan eligibility and repaid with equal monetary commitment. Family members, including spouses, parents, siblings, and kids, can co-applicate for the joint home loan. You can enjoy increased home loan tax advantages with a joint home loan and also a concession in the housing loan interest rate for women co-applicants
Here are some things you should keep in mind before having a co-applicant for a home loan:
1. Co-borrower or Co-applicant:
A close family member can be your co-applicant or co-borrower. They should have a job or be self-employed. NRIs are also qualified to be co-applicants. These can be your co-borrower: Spouse, parent, and sibling.
2. Joint Home Loan Criteria for eligibility:
The connection between the co-applicants controls the joint home loan eligibility. Not two or more individuals can jointly apply to purchase the home. Spouses, siblings, or parents are considered good co-applicants or co-borrowers. However, an utmost of six individuals can be co-applicants beneath one home loan application. Often, financial institutions that include banks and housing finance companies demand that applicants be co-owners to be suitable for co-borrowing a joint house loan. Thus, you must confirm the co-ownership clause in your property arrangement to qualify for a joint home loan application.
3. Documents Mandated for Joint Home Loan:
KYC Documents, Identity Proof, Address proof, Income proof – Bank statements/Salary Slips, Proof of co-ownership of the property, and Property documents.
4. Joint Loan for Couples:
If you are an employed couple, applying together for a home loan makes sense. Hence, two earnings can support the loan repayment; you can almost double the loan payment you were otherwise qualified for as a single applicant. However, you both can obtain income-tax benefits against your house loan. Make sure you buy the home together to benefit from a higher loan amount as well as income-tax benefits. You can get a term of up to twenty years for a joint house loan with your spouse.
5. Home Loan with Parents:
If your earnings are inadequate to get the desired home loan amount, you can add your parent's name as a co-applicant. Ensure your parent is a co-owner, as indicated in the application. In the case of a joint loan with parents, your house loan period is the most important aspect. The term could be restricted to the retirement age of your parent, and hence your EMI payment may be higher, or the loan amount may be lower.
6. Applying with Siblings:
You can co-own the house with your brother or sister and apply jointly for higher loan amounts. You and your sibling will get an income tax advantage for the reimbursement of principal and interest according to your share of ownership. Commonly, brothers and sisters are not regarded as co-borrowers.
7. Cannot apply for a joint loan:
Spouses, parents, or siblings can be co-applicants while taking a joint home loan. Friends, sisters or unmarried couples, or business partners can be co-owner of a house, but they cannot be co-borrowers in a joint housing loan.
8. Stake of Ownership:
The lender is more concerned about each applicant's earnings while determining the loan amount to be paid. Irrespective of your percentage in a property, each co-borrower is jointly and severally responsible for reimbursing the loan with interest. Therefore, if one borrower defaults on the amount, the other can repay the entire loan. For income tax immunity, it can be used in proportion to the share of each co-applicant. If nothing is cited in the property contract, it will be assumed that each co-borrower has an equal share in the house. Hence, the complete exemption claimed by all the co-owner cannot surpass the actual payment made to the lender.
9. When a co-applicant dies:
In case of a death of a co-borrower, the lender and other co-borrowers should be informed instantly. This is important because the dead applicant's loan reimbursement responsibility will be transferred to the remaining co-borrowers, increasing each person's monthly financial payment. If the Equated Monthly Instalments are paid on time, the lender will not conflict with the borrowers. However, if the remaining co-applicants cannot refund the amount, the lender can take legal action against them. Furthermore, it has the right to take custody of the property and resell it for loan recovery.
10. Tax Advantages:
Both co-borrowers can apply for income tax benefits towards both principal repayments and interest income. Each co-borrower can get joint house loan tax benefits for interest up to two lakhs under Section 24 of the IT Act. Thus, a total of four lakhs can be claimed as a deduction. But, the total interest asserted by both the co-applicants cannot surpass the actual interest paid to the lender. Since in the starting years of a house loan, the main component of your EMI is the interest expenditure; you can take utmost benefit under this condition of the Income Tax Act.
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