Buying your own home is perhaps the most significant financial decision you would make in your lifetime. Apart from selection of the house and negotiation of the buying price, arranging finances for the home purchase is the most painstaking task.
The research shows that, during the process of finding your dream home, around 70% of home-buyers end up in buying the house, which is 20% more costly than the initially planned budget. Arranging the additional finance is stressful, if not handled cautiously.
Since the primary source of fund for home buying is the home loan, one tends to apply for a higher home loan. However, banks do not grant more loan than your monthly income criteria, irrespective of the purchase price of the house. In such a case, a joint home loan application increases the chances of getting a higher home loan amount.
What is Joint Home Loan?
A joint home loan is a housing loan which is taken by more than one person and repaid with equal financial responsibility. Family members, including spouse, parents, siblings and/or children can be the co-applicants for the joint home loan.
WHO CAN BE A CO-BORROWER or CO-Applicant?
An immediate family member can be your co-applicant or co-borrower. He/she should be salaried or self-employed. NRIs are also eligible to be co-applicants. Below can be your co-borrower:
Joint Home Loan Eligibility
The relationship between the co-applicants governs the joint home loan eligibility. Not any two or more persons can jointly apply to buy the home. Spouse, siblings or parents are considered as valid co-applicants or co-borrowers. Moreover, maximum six persons can be the co-applicants under one home loan application. Many times, financial institutions that include banks, NBFCs and housing finance companies insist that applicants be co-owners to be eligible for co-borrowing a joint home loan. Hence, you must ensure co-ownership clause in your property agreement to qualify for a joint home loan application.
Benefits of Joint Home Loan
- Increased loan eligibility
- Buying home in a preferred location
- Enhance the budget for a bigger house
- Maximum tax benefit
- The lower interest rate for women applicants
- Share the repayment: Equal liability of repayment.
Why taking joint home loan in India is beneficial?
- Tax Benefit – both or all co-borrowers can claim tax deductions.
- Large loan amount for large house.
- Attractive interest rates with enhanced home loan eligibility.
Documents Required for Joint Home Loan
- KYC Documents
- Identity Proof
- Address proof
- Income proof – Bank statements/Salary Slips
- Proof of co-ownership of the property
- Property documents
Both the applicants are liable to submit the required documents.
Joint Home Loan for Couples
If you are a working couple, applying jointly for a home loan makes sense. Since there would be two incomes to support the loan repayment, you can practically double the loan amount you were otherwise eligible for, as an individual applicant.
Moreover, you both will get income-tax benefits against your home loan. Make sure you buy the home jointly to take advantage of availing a higher loan amount and income-tax benefits. You can get tenure of up to 20 years for a joint home loan with your spouse.
Joint Home Loan with Parents
If your income is not sufficient for getting the desired amount of home loan, you can add your parent’s name as co-applicant. Make sure that your parent is a co-owner as shown in the application. In case of Joint Home Loan with Parents your home loan tenure is most important factor. The tenure could be limited to the retirement age of your parent; hence your EMI amount may be higher, or loan amount may be lesser.
Applying Jointly with Siblings
You can co-own the property with your brother/sister and apply jointly to avail higher loan amounts. Your sibling and you will get income tax benefit for the repayment of principal and interest according to your share of ownership. Generally, brother and sister are not considered as co-borrowers.
Who can or cannot apply for joint home loan?
Spouse, parents or siblings can be a co-applicant while taking joint home loan. Friends, sisters or unmarried couples, business partners can be a co-owner of a property but they cannot be a co-borrower in a joint housing loan.
Share of Ownership
The bank is more concerned about the income of each applicant while deciding the amount of loan to be disbursed. Irrespective of your share in a property, each co-borrower is jointly and severally liable to repay the loan with interest. Hence, if one applicant defaults on the payment, the other is liable to compensate the entire loan.
For income tax exemption, it can be applied in proportion to share of each co-borrower. If nothing is mentioned in the property agreement, it will be assumed that each co-owner has an equal share in the property. Moreover, the total exemption claimed by all the co-borrowers cannot exceed the actual payment made to the bank.
Both co-applicants can apply for income tax benefits towards both – principle re-payment and interest income.
Each co-applicant can claim joint housing loan tax benefits for the payment of interest up to Rs. 2 lakhs under Section 24 of the Income Tax Act. Hence, a total of Rs.4 lakhs can be claimed as a deduction. However, the total interest claimed by both the co-applicants cannot exceed the actual interest paid to the bank.
Since in the initial years of a home loan, the major component of your EMI (Equated Monthly Instalment) is the interest payment, you can take maximum benefit under this provision of the Income Tax Act.
The principal component of the EMI can be claimed as a deduction from taxable income under Section 80C of the Income Tax Act. In this case also, both the co-applicants can claim the benefit, subject to a maximum limit of Rs. 1.5 lakhs individually. However, the total amount claimed by both co-applicants cannot exceed the actual principal amount repaid to the bank.
Repayment of Joint Home Loan
Each co-borrower can give ECS mandate of his/her bank account for the repayment of their home loan. For easy administration, you can also choose to give ECS (Electronic Clearance Service) mandate from the bank account of the first applicant, and the second applicant can repay to the first applicant. The bank gives you flexibility of repayment as far as you are paying full EMI and on time. Irrespective of ECS mandate or advance cheques given, kindly be informed that it is the responsibility of each applicant to repay the loan. The bank uses the term “each applicant is jointly and severally responsible” for repayment of the home loans. You can calculate EMI through home loan EMI calculator.
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