Co-borrower vs Co-owner vs Co-applicant

Co-borrower, co-owner and co-applicant are the terms that some people use interchangeably. However, each of these terms has its associated legalities and financial obligations related to home loans. Therefore, you must know what these terms mean and how they are different.

Who is a Co-applicant?

A co-applicant is a person who applies for a home loan along with the principal borrower and shares responsibility towards loan repayment. A co-applicant can enjoy tax benefits provided s/he is also a co-owner.
In most situations, only your closest relatives, such as a father or, in some instances, a sibling, are considered for a joint loan application. A joint home loan is often applied by a husband-wife, father-son, or mother-son team. Banks do not recommend using a friend or distant family as a co-applicant for a house loan. If the primary applicant fails to repay the loan, the co-applicant becomes equally responsible.

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Who is a Co-owner?

Co-owner is a person that has a legal share in the property for which the loan is to be taken. A co-owner shares the loan burden and enjoys the tax benefits that come with a home loan. A co-owner cannot be a minor or a person not eligible to enter into contracts as per Indian Law.

Who is a Co-borrower?

A co-borrower is a person who takes a joint loan along with the primary borrower. S/he is liable to share the responsibility of loan repayment equally. A co-borrower can only enjoy the tax benefits if s/he is a co-owner of the property as well. If you are asking someone to be a co-borrower, make sure you keep in mind the below-mentioned points:

• The co-borrower should be a spouse or an immediate relative
• The co-borrower cannot be a minor
• If there is a payment default or death of the primary borrower, all the repayment obligations of the home loan fall on the co-borrower
• The co-borrower must have a regular and consistent income source to pay the home loan

Last but not Least

If you are looking forward to applying for a home loan, having a co-owner, co-applicant, or a co-borrower can be an added advantage.

• Increase in the Loan Amount– One of the most prominent benefits of applying for a home loan with a co-applicant is the increase in the eligible loan amount. As the amount sanctioned for a home loan is directly proportional to your income, having a co-applicant significantly increases your potential loan amount by two times, provided the co-applicant has a steady source of income.
• Tax Saving – Deductions of up to Rs. 1.5 lakh can be claimed by a co-applicant under section 80C. Further, a co-applicant can also claim tax benefits under section 24B if the property is occupied within three years of taking a home loan. Tax can also be saved on the amount paid for stamp duty and registration.

Suggested Read: Income Tax Benefit on Home Loan FY 2021-22

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