JOIN USHome is where the heart is, goes an old English idiom. Indeed, for many of us, our homes will always be the place for which we feel the deepest affection, no matter where we are. A home is also one of the most important assets that we invest in our lifetime. While the government does its bit to make housing more affordable, many still perceive the home loan application process as a complex procedure that is far from easy. Given the high real estate rates in most urban centres across the country, buying a home is quite capital-intensive. Some of us may have actually faced the situation where the approved loan amount by a financial institution has fallen way short of the price of that dream home.
So, is there a way how one can avail of a larger home loan? The solution is simple. Apply for the loan jointly with a co-applicant. With this, you can significantly increase your chance of getting a bigger loan as by combining incomes, the total revenue into consideration enhances and even the repayment capacity surges.
But remember, while all co-owners should be co-applicants for the home loan, not all co-applicants need to be co-owners. Moreover, for a smooth transaction, ensure that your co-applicant has a good credit score, as a low score of even one applicant will adversely affect the combined credit score. It is also advisable for the co-applicant to have a separate insurance to reduce the financial burden in case of any unfortunate incident or
sudden demise of any applicant.
Now, the pertinent question that arises is — who can be the prospective co-applicants for home loans. In the Indian context, married couple, father and son (where son is primary owner in case of multiple heirs) or father and unmarried daughter (where daughter is the primary owner), brothers (in case of co-owned property) and businessman/woman along with his/her company can be co-applicants.
In a joint home loan, the benefits can be many, such as:
l Increase in loan eligibility: Loan is sanctioned after assessing the repaying capacity of the applicant/s based on the income. By adding the income of the co-applicant, an individual can avail a larger loan. This is one of the biggest benefits of joint home loan. The lenders will consider income of all the applicants, and thereby, increase the loan eligibility value.
l Chance of a bigger home: With the eligibility increasing significantly, the chances of buying that dream home can come close to reality. A bigger home provides excessive space and is an important factor in family planning.
l Shared responsibility: When you add a co-applicant for your home loan, you share the responsibility for paying back the home loan. This helps foster a shared sense of ownership and reduces the economic burden on the individual. It is important to understand that joint home loans do come with a great deal of benefits along with a few liabilities. When you are a co-applicant in the loan, you become equally liable to repay the loan amount.
l Tax benefits: Your co-applicant and you are also eligible for income tax rebate up to Rs 1.5 lakh each on repayment of principal amount of home loan under Section 80C of the Income Tax Act, and up to Rs two lakh each under Section 24 of the Income Tax regulations. It’s important to note that the tax benefit of both the deduction on home loan interest and principal repayment can only be claimed once the construction of the property is complete. In case of a joint home loan, both the applicants can enjoy these benefits proportionate to the extent of contribution towards repayment. It is advisable to consult your tax consultant or financial advisor for more detailed information and advantages.
l Transfer of ownership: Apart from the above benefits, joint property ownership leading to a joint home loan eases the process of transferring ownership in favour of the other applicant (who is a co-owner too) in any unforeseen event. Joint registration of property is always advisable as the spouse is usually the successor. This prevents unwarranted problems in the future.
l Benefit in Stamp Duty Charges with female co-applicant: Many may not be aware that some states offer a reduction in stamp duty charges in case your co-applicant is female. For example, in New Delhi, if the applicant is a woman, the stamp duty is levied at 4%, for married couples at 5%, and for single men at 6%.
Sometimes, it does make sense to take a joint home loan. There are several benefits of getting a home loan with a co-applicant. Once you are clear about your objective, you can even gauge your Home Loan EMIs using an online calculator.
(The author is business head & general manager, PNB Housing Finance Limited)