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Posted Date: Dec 10 2020   |   Posted By : DCNPL

A Complete Guide On The Joint Home Loan

Purchasing a home is "once-in-a-life" investment for many of us and owing to this reason we always strive to make it as big as possible to get ourselves our very own comfortable cottage. The reason behind opting for big investment is, affordability determines the location, size and quality of the property.

However, arranging finance for your property is an arduous task unless you are a regular real estate investor. The most common way to get the amount for acquiring property is by getting a home loan, yet many factors influence your home loan eligibility such as age, income levels, other loans that you are still repaying, etc. These factors altogether, sometimes make an individual ineligible for getting the loan or even if the person is eligible he/she may struggle to get the higher amount. In such circumstances, it becomes more complex for a person to get finance for his/her home, that's where "Joint home loan" comes into limelight.

Let's come and understand how this joint home loan option is beneficial for a person. But before that have a look at what is a joint home loan and who can apply for it.
As the name itself suggests, a joint home loan is a loan that is taken by more than one person. It is availed with a co-applicant to be eligible for the higher loan amount. All the borrowers in a joint home loan share equal financial responsibility. Since two or more incomes are condensed in a joint home loan, the sanctioned amount is higher than the regular home loan.

Who can be the co-applicant or co-borrower in a joint home loan?
To avail a joint home loan, only an immediate family member can be a co-applicant or co-borrower. A co-applicant/co-borrower must be salaried or self-employed. NRIs can also be a co-applicant/co-borrower. Below can be your co-applicant:

  • Parent

  • Spouse

  • Sibling

The maximum limit of the co-applicants in a single joint home loan is six. Furthermore, many banks and NBFCs consider a person co-applicant only if he/she is the co-owner of the property. Different banks and NBFCs have different eligibility, so go through all the terms and conditions before applying for it.

Benefits of opting for a joint home loan option:

  • Higher loan eligibility - Under this loan, the income of more than one individuals are combined which increases the creditworthiness of the applicants and co-applicants, making them eligible for acquiring a bigger loan amount than the regular home loan. A bigger amount means affordability to get the better and best home.

  • Higher tax benefits - By applying for a joint home loan all the co-applicants enjoy separate tax benefits. The reason behind this as they both is contributing separately for the repayment of the loan. Under Section 80C of the Income Tax Act up to a maximum limit of Rs.1.50 lac can be deducted on the principal repayment amount, whereas under Section 24 up to Rs 2 lac can be deducted on the interest repayment.

    The actual amount of tax benefit basked by each co-applicant is in proportion to their contribution in repayment of principal and interest. The collective tax benefits are much higher in the joint home loan as compared to the regular home loan.

  • Lower interest rate for female co-applicants - Various banks and NBFCs offer a lower interest rate to the female customers. The interest rate is generally a few basis points lower than the regular home loan rates. To enjoy the benefit of lower interest rate, a female has to be a joint owner of the property and as well be the co-applicant for the home loan.

  • Shared liability - Another benefit of opting for a joint home loan option is that your liability of repaying the loan is distributed among all the co-applicants proportionately. Unlike regular home loans where an individual has to bear the complete liability.

Every coin has two sides, similarly, if the joint home loan has benefits, then it has limitations also, which are explained as follow:

  • Eligibility and credit score - Since in joint home loan, the creditworthiness of all the co-applicants is significant, if any of the co-applicants fails to pay the EMI, then it will affect the credit score of all the applicants.  This situation generally arises when there are more than three co-applicants. It also affects the eligibility for a loan in the future for all the co-applicants.

  • Limited share in the property - Unfortunately, if any of the co-applicants died without a proper will, then the surviving co-applicant will only get one-third share in the property while the remaining will be distributed to the other immediate family members of the deceased.

  • Divorce between the married couple - If the joint home loan is taken by husband and wife and if they are getting divorced, then the repayment of the loan becomes complex. Because if any of them stop paying the EMI, then the entire burden falls on the other applicant. According to experts, this situation arises when there is no benefit of the ownership of property. So, to overcome this, an agreement should be signed by both husband and wife that clearly states each partner’s share of the loan liability, to avoid differences as such in the future.

  • Death of a co-applicant - In case any of the co-applicants dies, then the entire obligation of repaying the amount of the loan falls on the surviving partner. Making it much more difficult for the survivor, since now he/she has to pay the liability of two people. And if by any chance, the survivor applicant fails to repay the amount, then the property will be seized by the lender.

To opt for the best option for financing a property is one strenuous task that needs lots of research. Both regular home loan and joint home loan have their own benefits and differ from one another in terms of eligibility, disbursement amount and tax benefits. Understand your needs and do your homework properly to avail the best financing option.

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