What is a joint loan ?
A joint loan is when money is borrowed from the bank by two or more borrowers. An advantage of joint loan is that there is more than a single income holder to pay EMIs and also one can get approval for a higher loan amount. Additional borrowers also bring in better credit and collateral to help one qualify for the loan.
Joint home loan: Benefits
As property prices are reaching unrealistic heights, joint home loan is sought after by home buyers more than ever before. The main benefits of a joint home loan are
- You can qualify for a higher loan amount. As incomes from more than one sources would be put together, it would present you the opportunity to avail a higher budget for a bigger home in a city.
- All the borrowers are subject to tax rebate under Section 80 C for principal repaid and Section 24 for interest repaid. The cap for tax rebate stands at Rs 1 lakh for principal rebate and Rs 1.5 lakh for interest repaid.
- Joint home loan renders the opportunity for maximum tax relief as all the borrowers can avail the tax rebates simultaneously.
- While applying for a joint home loan, all the co-owners of the property should also be co-applicants. However, it is not mandatory that all the co-applicants should be co-owners of the property.
Who is eligible for a joint home loan ?
A married couple or a parent and child can take a joint loan. Some banks may allow brothers to take a joint home loan provided they will both be co-owners of the property. Usually the banks insist that all co-owners of the home must be co-borrowers in a joint home loan.
Apart from the above, sisters, friends and couple in live-in relationship may not be eligible for home loan.
Disadvantages of a joint home loan
It has become a trend among the married couple to apply for joint home loan in India. The reason being joint loan presents them with an opportunity to avail a loan higher than what they would have been eligible for if applied by any only one of them. However, if somehow your relationship with your spouse becomes shaky, then the equation may change for you forever. If the property is registered in the name of your spouse, then you may have to continue paying EMIs even if you would never get possession of the house.
When applying for a joint home loan, you must be absolutely sure of your responsibility in the agreement in the loan agreement. If the primary borrower passes away then it becomes the responsibility of the co-applicant to settle the loan in full.
Your repayment ability of the joint home loan affects your CIBIL score. If your co-applicant or partner in the joint home loan is not regular in repaying the loan, then your CIBIL score may suffer; thereby dimming your chance of qualifying for loans in future.
As the home loan is repaid over a long period of time, if either of the partners fall on hard days in future, then the picture becomes bleak for both them. It may also obliterate the chance of either of the co-applicants to settle down for a job with less remuneration.
When should you go for a joint home loan ?
Go for a joint home when you are absolutely confident about the responsibilities you would share. Make sure that the property is registered on your name as well and not just on your partner’s name. It would enable you to avail tax rebate.
You should draw up and sign an agreement with your spouse on splitting the liability, so that a future clash between the co-borrowers can be avoided.
Proceed with a joint home loan only when you clear all the doubts regarding issues such as who would be responsible for making payments? Who owns the property? How can you get out of the loan? What happens when one of the partners die? Etc.
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