We all aspire to buy a house of our own at some point in life. But what if your dream home is of a greater value than you can afford? This is where you may want to consider taking a joint home loan. A joint home loan is taken by 2 or more people by clubbing their incomes to raise a loan of higher value. It will not only help you take a loan of a higher value, but will also give you tax benefits too. Let’s look at each aspect of joint home loans in detail:
What are the benefits of taking a joint home loan?
1. Higher Loan Amount:
If a single income is not sufficient to cover the loan amount, then you can bring in a co-applicant to get a higher loan amount. Many couples opt for joint home loans to raise a loan of higher value. 2. Tax Benefits:Joint home loans are beneficial from a tax point of view too. Co-owners of property, who apply as co-borrowers can avail tax benefits under Section 24 and Section 80 of the Income Tax Act. For detailed information see; Home Loan: Tax Benefits
Who can be a co-borrower?
A co-borrower is a person with whom you take the home loan. Each co-borrower is equally responsible to repay the loan amount. Joint home loans can be taken by as many as 6 co-borrowers.
Married couples: One can be a co-borrower with their spouse. For the lender, this is an ideal situation. In this case, both need not be co-owners of the property. However, co-ownership is always advised.
Father and son: When the father has only one heir, either of them can be the main owner of property. But if the father has more than one heir, then the lending institution would ensure that the son is the primary owner, to avoid any disputes after the demise of the father.
Father and unmarried daughter: In this case, lending institutions would ensure that the daughter is the primary owner of property before granting loan. This is done to avoid any disputes after her marriage.
Mother and unmarried daughter: This case is similar to that of father and unmarried daughter.
Brothers: They can be co-applicants in a loan provided the property is co-owned by them, they are currently living together, or are expected to live together in the new property.
Friends, sisters, cousins, brother – sister and unmarried partners are generally not given joint home loans. When the spouses apply as joint applicants, the maximum term of home loan can be 20 years, depending on the retirement age of the older applicant. When co-applicants are parents or brothers, the maximum tenure is restricted to 10 years. Also, if parents’ income is considered for repayment, loan tenure is restricted by their retirement age. Know more about your joint home loan eligibility from our home loan advisor at +91-8108899980 or sign up here and we will call you!
What if there is a dispute between co-borrowers?
To avoid any disputes in future, ask the lender to state in the loan itself that each co-borrowers’ liability shall not exceed a given per cent of the principal amount. If the lender disagrees to such a clause, then you can draw up an agreement with all your co-borrowers on splitting the liability. Put down all the terms on a stamp paper and sign it.
How to repay a joint home loan?
A joint home loan can be repaid like a regular home loan. EMI payments can be made through a single/ joint account. A few consider giving proportionate cheques for each EMI, but this can’t be done as banks’ internal systems don’t accept 2 cheques for same EMI. You can divide the repayments with the help of postdated cheques. As far as the bank is concerned, it doesn’t matter who contributes how much in repayment, as long as EMIs are paid timely. If there is a default in payment, it will proceed with the standard loan recovery process against all co-borrowers. Thus, before taking a joint loan, it is very important to understand what your rights and responsibilities are.
Here are a few points you must consider before taking a joint home loan :
Before you sign as a co-applicant, make sure you get a right to the property. If you are going to repay the loan, you might as well benefit from the property.
A couple taking joint loan should ideally take separate term life covers to reduce financial burden on the other in case of one’s demise.
The repayment record of a joint home loan reflects in the credit score of all co-borrowers. Default in payment by any partner can impact your eligibility for a loan in the future.
Get answers to the following questions before taking a joint home loan;
Who is responsible for making payments?
Who owns the property?
How can I get out of the loan?
What if I want to sell my share?
What happens to the property if one of us dies?
Since the lender gave loan based on a joint application, if the primary borrower defaults, files for insolvency or passes away, it becomes the co-applicant’s responsibility to repay the loan. So, you must make sure that your co-borrower is trustworthy and has the financial ability to pay off his share.
What documents are needed to apply for joint home loan?
Since most banks have a different requirement of documents to sanction a joint home loan, it is difficult give a complete list. A few documents you will need to provide are:
ID proof (PAN, passport, electricity bill)
income proof (form 16)
bank statements of both the applicants
proof of co-ownership of the property
Income tax returns
Occupation certificate from builder
Share certificate from builder/society
Here are a few FAQs asked by our customers, which may help you get a better understanding:
1. Should the co-owners be co-applicants?
Yes. Home loan companies insist that all co-owners be co-applicants. But the reverse is not true. All co-applicants need not necessarily be co-owners.
2. If the apartment is in my wife’s name, can I take the loan?
Yes, but you and your wife will have to be co-applicants for the loan. However, if you are neither the owner nor the co-owner of property, you will not be eligible for any tax benefits on loan repayments.
3. If my wife and I have bought a home, can we register it in either of our names or should it be registered on both our names?
If the property is jointly owned, it is advisable that it be registered in both your names.
4. My wife and I own a house with equal ownership. But I am repaying the entire loan, so can I avail full tax benefit?
Yes. You can avail full tax benefit on the interest component of your loan.
5. My wife and I own a house with ownership being 50:50. Right now I am repaying the entire loan. After a year, she will start working.Can we split the loan repayment and tax benefits then?
Yes you can. However, frequent change regarding loan repayment and tax consideration is not is not advisable as they may appear artificial or look like a way of tax avoidance.
6. If my spouse and I have not specified the percentage ownership, is it automatically taken as 50:50?
Yes, as that is the easiest assumption to make. This can be rebutted by entering into a written agreement about percentage of ownership.
7. Can onespouse claim the interest benefit and the other the principal repayment benefit?
No. Each tax benefit has to be shared in proportion to each one’s share in the loan.
8. How can my wife and I show IT department the way we have made our payments?Will the bank give us a certificate stating how much each has paid?
To show share in loan payments, you can enter into a formalized agreement with your wife stating shares of loan. This can be done on stamp paper. The bank will give you a certificate, of which you can make 2 copies and submit it in your individual IT returns along with the agreement.
9. If a home loan has been taken by a father and the loan has been sanctioned on the basis of his son’s salary can he claim tax rebate on interest payments?
According to Income Tax Act, the person who has taken the loan can claim tax rebates. So, the son can avail tax benefits only if he is a co-owner of the property.
10. If a property is owned by a woman who has no income, can her husband claim IT benefits as a co-applicant?
No, IT benefits can be availed only by property owners. A home loan is one of the biggest liabilities one takes in a lifetime. Make sure you consider all the benefits and risks before taking a joint home loan with a trustworthy co-borrower. Meanwhile, if you already have a home loan, use the calculator below to see how much you can save by switching to a lower interest rate. Have any more queries? Feel free to ask us in the comments section below.
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