The Buyt Desk
When you plan to buy a house, there begins a series of long financial calculations. It is not a cheap affair and requires huge funds. In most cases, a home loan comes to the rescue. Now, the important consideration is “how much loan will the bank be ready to sanction?” There is a simple way to increase the loan amount. Take a joint home loan.
Advantages of applying for a home loan with a co-borrower
Let us first understand who is a co-borrower. A co-borrower can be your spouse or a blood relative such as a brother, a sister, or parents. He should be an earning member whether self-employed or salaried. Both you and the co-borrower are liable to repay the home loan. Your friend or an unmarried partner is not eligible to be a co-borrower/co-applicant for a home loan. There can be as many as six co-applicants for a home loan.
Easy loan
A joint home loan is sanctioned easily in comparison to an individual home loan. This is because banks know that the repayment liability is not borne by a single individual. In fact, banks recommend that co-owners (all the people who have ownership of the house) should be co-applicants in the home loan.
Higher loan eligibility
Bank considers earning potential and creditworthiness of all of the co-applicants, and thus, it sanctions a greater amount in a joint home loan. This will reduce the amount you have to save for the down payment. It will also distribute the burden of EMIs among the applicants. Overall, you will not compromise a lot on your monthly budget. Moreover, with two or more people contributing towards loan repayment, you will be free of the debt sooner.
The banks also decide the term of the joint home loan based on the age of the co-applicants. For instance, it will be 20 years if you apply with your spouse and 10 years if you apply with your parents.
Lower rate
If one of the co-applicants in a home loan is a woman, then banks offer the loan at a lower rate. The rate is lower by 10 to 25 basis points for female applicants. Thus, it is only sensible to apply for a joint home loan with your wife, sister, or mother.
Tax benefits
Both the co-applicants can enjoy the tax benefits associated with a home loan, offered by the IT Act. They can file for a tax deduction in the amount paid as principal (Section 80C) and interest in a financial year (Section 24). The tax benefit is proportionate to the share of the applicant in the joint home loan.
A home loan with co-applicants does not put the complete burden of repaying a loan on a single person. Along with the above-mentioned advantages of a joint home loan, your affordability for a bigger house increases. In fact, you have the opportunity to move to a location of your choice. A joint home loan is not only effective for financial planning but also tax planning of the family.
