Owning a Home of your dreams takes work. With the rising cost of home purchases in urban areas, it is difficult to get home loans to fund the purchase. Not just finding the perfect to build your family, but also finding the right lender to provide a loan for the purchase.
Finding a spacious home within your budget might be a far approach. Also, there are chances the requested loan amount might not get sanctioned. This is a usual case when the application is submitted in an individual capacity. To increase the chance of approval of the requested loan amount, the application should include a co-borrower with increased eligibility and affordability.
Who can be a Co-Borrower in Joint Home Loan?
A co-borrower is a person with whom the Joint Home Loan is held. Generally, co-borrowing can be availed with the following relationships.
- Married Couple
- Father and Son
- Father and Unmarried Daughter
- Mother and Unmarried Daughter
The ineligible relationships for Joint Home Loans are Sisters, Friends, Cousins, Unmarried partners, and brother-sister.
Benefits of Joint Home Loan
- Higher Eligibility
A joint Home Loan increases the eligibility of a Home Loan application. In a co-borrowing application, the combined income of the applicants is considered. With higher income, the loan value can also be high and the chances of approval of a big amount are high.
For example, if the application is submitted in an individual capacity with an income of Rs.1 Lac, the max. EMI value can be Rs.40,000/-(approx.). When applied jointly with an income of Rs.1.5 Lac, EMI can go upto Rs.60,000/-(approx.)
- Tax Benefit
The tax benefit is another important reason for which a Joint Home Loan is advised. Generally, a home loan borrower is allowed to have a tax deduction of Rs.1.5 lacs under section 80C and Rs.2 lacs under section 24 of the Income Tax Act. But when you apply for a home loan with a co-borrower, both borrowers are eligible for separate deductions. This means both can together avail of a tax benefit of Rs.3 Lacs under section 80C and 4 Lacs under section 24. With these savings on tax, one can save up to 7 lacs in total which is a great amount. However, it has to be noted that if a co-borrower and a co-owner of the property aren’t the same, then he/she cannot enjoy this tax benefit.
- Sharing Debt Burden
The debt burden can be shared in case the home is purchased jointly. If the co-borrower and co-owner are the same, the partnership works even better. In such cases, with reduced financial pressure, both applicants can enjoy ownership.
- Stamp Duty
In many Indian states, female homeowners enjoy certain privileges. One such benefit is lower stamp duty. Having a female co-borrower will reduce stamp duty. The State Government has taken this step to encourage women’s empowerment.
- Rate of Interest
To encourage women’s ownership of homes, the union government through banks provide reduced interest rate. Also, additional offers are extended by the bank to promote female ownership. Banks provide upto 0.5% discount on interest rates which is a substantial saving in the long run. The reduced interest rates are applicable only if one or both applicants are women.
Documents required to apply for Joint Home Loan
The following documents of both applicants are required for applying for a Home Loan jointly.
- Identity proof (PAN, Passport, Aadhaar)
- Address proof (Voter ID, Utility Bill, Aadhaar)
- Proof of Income
- Bank statements of both applicants
- Co-ownership of property
- ITR – Income Tax Returns
- Occupancy certificate for new projects
- Share Certificate from builder
What if the Co-borrowers split in the future?
There is the possibility of co-borrowers splitting in the future due to divorce, death, or dispute. In such cases, there is a high possibility of defaulting and tangling in legal liability. To avoid such situations, the co-borrowers must enter into legal liability agreement. It will be wise to take individual term insurance or home loan insurance to avoid future conflicts.
Taking a Home loan jointly is beneficial in owning a bigger home with a bigger loan that is not possible with the individual applicant. With benefits such as Tax savings and lower interest rates, Money Mango arranges Joint Home Loans in Bangalore from reputed Banks and Non-Banking Finance Companies (NBFCs) to fund the purchase of your dream home.