Buying a house is a huge decision by any standard. Big or small, apartment or villa, most people depend on loans to finance their house purchase. The loan amount sanctioned depends on your income and other criteria.
Generally, lenders want the loan amount to be not more than 30% of your total income.
If you have chosen a large apartment or villa, or a house in a prime locality, the cost of the property might be high. Your income might not be considered adequate by the lender to grant you the loan amount required. In this case, if you can find a co-applicant for the loan, you have a better chance of getting the loan amount you need.
Joint Home Loan
A joint home loan is a loan with two or more co-applicants. Upto six co-applicants can apply for a joint home loan. Married couple and blood relations are eligible to apply for joint loans, but there are certain unwritten rules concerning who the lenders consider as eligible co-applicants.
Siblings, especially sisters are not considered ideal as co-applicants because banks doubt whether they will still keep up with payments after marriage. A parent might apply along with son or daughter, but the best co-applicants are spouses.
If you are buying a home for your family, you can get a better house if you apply for the home loan along with your spouse. Your combined earning potential can get you a larger loan amount to finance the house of your dreams.
So, when you have chosen a good residential property, calculate your individual incomes and then your combined incomes. If the cost of the house is on the higher side, apply for a joint loan to make the Home Loan Process easier.
The Eligibility Criteria for the home loan is the same for joint loans as for individual loans. However, all co-applicants need to submit the required documents like their KYC documents and income proof. Because the bank needs to process the individual sets of documents, the home loan processing time might take a bit longer.
Repaying the Loan
Each co-borrower has to keep up with their proportion of the loan repayment. The lender will not accept separate cheques from each borrower, so you may pay from a joint account or issue a cheque from one person’s account while the other pays the issuer of the cheque.
If one co-borrower is unable to keep up with the required payment for any reason, the EMI payments still have to be made fully. So, the burden falls on to the other co-borrower. If the EMI payments are not made, the bank will take action against all the co-applicants.
Accidental death or disability can suddenly cut off one source of funds for the EMI. To prevent such situations, it is better to have an insurance cover for each co-borrower.
Tax Benefits on Joint Home Loans
Each co-borrower who is also a co-owner of the property can claim tax benefits on the interest paid per annum and on the principal repaid. Each co-borrower can claim the tax benefits in proportion to their share in the repayment. For instance if a husband and wife make the repayments in a 60:40 ratio, the husband can claim benefits on 60% of the amount paid, while the wife can claim tax benefits on the remaining 40%.
Under Section 80C of the Income Tax Act, upto Rs. 1,50,000 can be claimed for exemption on the principal component of the total EMI payments. Upto Rs. 2,00,000 can be claimed on the interest amount paid in the EMIs.
A joint home loan does not just increase your eligibility for a higher loan amount, it also gives you additional tax exemptions as each co-applicant can claim the benefits individually on the loan. It also eases the strain of repayment and helps you get a good home for your family.