Benefits of Taking a Joint Home Loan: Is It Right for You?
Do you have a home you have your eyes on? Is it too beautiful, too expensive and honestly a little out of your budget? Are you worried you won’t be approved for the home loan amount you have in mind and will need to complete your property purchase? If yes, the answer to your problems could be a joint home loan.
What is a Joint Home Loan?
A joint home loan is a loan by more than two individuals. In other words, the responsibility of repaying a joint home loan lies not with only one individual but with two or more people.
Since the repayment responsibility is shared by all joint home loan applicants, lenders take into account the income, credit score and repayment capacity of all the individuals mentioned in the joint home loan application while deciding the home loan amount as well as other loan terms and conditions, such as the interest rate to be extended, the processing fee to be charged, loan tenor, etc.
Thus, it is not surprising that a joint home loan often allows loan applicants to borrow a higher loan amount and negotiate for more favourable loan terms and conditions. Lenders have strict qualifying criteria about who can avail of a joint home loan.
For instance, while an unmarried son can avail of a joint home loan with his father, most lenders do not sanction a joint home loan applied for by a father and unmarried daughter, primarily because lenders want to avoid any property dispute that may arise after the daughter’s marriage.
So, if you are planning to apply for a joint home loan, one of the first things that you must do is check with your lender whether you are even eligible to apply for a joint home loan with the person you have in mind.
Joint home loans offer many benefits. In the next section of this article, we look at these benefits in detail.
Benefits of Joint Home Loans
1. Loan Repayment is Easy
When the responsibility of loan repayment lies with only one individual, the chances of loan default are higher. If the loan borrower loses their job or finds themselves unable to work due to personal or professional reasons, continuing to pay loan EMIs can become challenging. However, when two people avail of a loan together, the burden of loan repayment lies with two individuals and not just one. Thus, even if one person loses their job, the other can continue with their EMI commitment.
2. You Become Eligible for Better Loan Terms and Conditions
When two people apply for a home loan together, lenders take into account both the loan applicants’ income and repayment capacity while deciding the terms and conditions of the loan. Thus, joint home loans make borrowers eligible for higher loan sanctions, lower home loan interest rates, longer repayment tenors and other favourable loan terms and conditions, especially if both the loan applicants exhibit high creditworthiness and repayment capacity.
3. Borrowers Enjoy More Home Loan Tax Benefits
Individuals repaying a joint home loan can claim home loan tax benefits separately under Section 24b and Section 80C of the Income Tax Act. While Section 80C of the Income Tax Act deals with home loan tax benefits available on the principal component of one’s home loan, Section 24b deals with home loan tax benefits that one can claim on the interest component of the loan. Joint home loan borrowers can claim tax benefits separately under both these sections and make the total home loan tax benefit they are eligible for go up to Rs.7 Lakh a year.
4. Better Home Loan Interest Rates When You Add a Female Co-Borrower
The government of India is devoted to the task of women empowerment. Therefore, when an individual adds a female co-borrower, lenders not only sanction the loan at lower and better home loan interest rates but the loan borrowers also automatically become eligible for concessions on stamp duty and registration charges, which helps bring down the cost of acquiring the property.
Final Words
To sum up, a joint home loan can make it considerably easier for loan borrowers to obtain a larger home loan amount at better or lower home loan interest rates and then repay the loan comfortably. If you are planning to opt for a joint home loan, make sure to research housing loan eligibility criteria and apply only if you qualify.