How Does a Joint Home Loan Benefit Co-Applicants?

Purchasing a house is one of the biggest financial decisions you will make, and in India, a joint home loan can be an easier way for many to achieve this goal. If you’re going to take a loan on a residential plot or buy an apartment, there are a few advantages to applying together with a co-applicant. This post highlights some advantages of co-applicants taking joint home loans and why it's worth considering one.

What is a Joint Home Loan?

A joint home loan is a loan taken by two or more people to buy a house. Among co-applicants may be:

• Spouse

• Parent

• Sibling

• Descendant

In almost all cases, banks allow close family members to make a joint application since it helps them qualify more easily.

Key Benefits of a Joint Home Loan

Several financial and practical benefits come with taking a joint home loan:

1. Higher Loan Eligibility

When you apply alone, your loan amount is determined by both your earnings and score. As such, in case you take a joint home loan, financiers consider using both individuals’ monthly income to calculate how much higher the borrowed sum could be.

Example:

If you earn ₹50,000 while your wife gets a salary of ₹40,000 per month, then when it comes to borrowing money together as a couple can be an advantage compared to borrowing alone.

2. Tax Benefits for Both Applicants

One of the biggest advantages of a joint loan for a home is the ability to claim tax deductions under Section 80C and Section 24(b) of the Income Tax Act 1961. Provided each co-owner has a loan:

• Principal Repayment: (Up to ₹1.5 lakh deduction under Section 80C per person).

• Interest Payment: (Up to ₹2 lakh deduction under Section 24(b).

Consequently, such a joint loan for a home allows both partners to enjoy tax breaks while saving on their returns.

3. Sharing of Re-payment Burden

It would be more cumbersome to make monthly payments, especially when it comes to EMI management, than otherwise if it were considered on an individual basis. Having one or several such transactions may cause trouble about who should pay what amount – but not if they are shared equally.

This helps them plan for monthly recurring costs, including saving money effectively.

4. Better Loan Terms

Joint applicants are often given better interest rates as well as more flexible terms of payment by banks and NBFCs (Non-Banking Financial Companies), particularly when one has a good credit rating.

One applicant with a high credit score (above 750) can enjoy the following privileges:

• Reduced rates of interest

• Quick approval

• Longer tenure for repaying the borrowed sum

5. Enhanced Property Ownership Opportunities

When two or several people decide to take a joint loan for a home, they become co-owners of the land, which ensures safe and clear product transfer.

Such an approach also simplifies matters associated with death, especially among married couples.

6. Women Borrowers Get Additional Benefits

Women in the family who serve as borrowers or act as co-borrowers when applying for such credit facilities receive special treatment from various lenders in the form of,

• Lower interest rates by 0.05% to 0.10%, respectively.

• Lower stamp duty by 1% in most states.

• Supporting ladies in owning houses is part of numerous government initiatives like Pradhan Mantri Awas Yojana or PMAY.

Important Considerations Before Taking a Joint Home Loan

When considering applying for a joint home loan on a residential plot, remember:

1. Both persons must do their part to make sure that their individual scores are good. This is because these scores are very important when it comes to the process of getting approved or not.

2. Both parties must become owners. Neither of these people will have access to the tax benefits if they are not joint owners of the house.

3. A clear delineation of ownership rights will help avoid misunderstandings that arise later.

4. One person can’t repay the lender’s debt alone.

How to Apply for a Joint Home Loan?

Below are the steps involved with applying for a joint home loan:

1. Choose a Lender: Compare banks and NBFCs for the best interest rates and terms.

2. Check Eligibility: Online calculators can be used to determine loan eligibility based on combined income.

3. Submit Documents: Some of these include

• ID proof (Aadhar, PAN).

• Income proof ( salary slips, bank statements).

• Property documents.

• Credit reports.

4. Loan Approval: The lender approves the loan amount by assessing your creditworthiness.

5. Disbursal: Upon approval, the loan amount is released within 3 to 5 days into the linked bank account.

Common Mistakes to Avoid

Securing a joint requires thorough planning. These are common errors to avoid:

• It’s important not to neglect or overlook other future financial commitments.

• Applying for the loan with a co-applicant with a low credit score.

• Failure to grasp legal obligations in case of misunderstandings.

The Bottom Line

A joint home loan comes in handy to make sure a property is more affordable, you can avail yourself of tax benefits, and your loan eligibility status is elevated. 

In other words, if you want to buy a house, you can get a joint home loan with your wife or other family members for better opportunities and financial benefits. Before you choose, always compare different lenders and get advice from financial experts.