Is it a good decision to include a co-applicant in your home loan?

Benefits of Joint Home Loan

Improving loan eligibility: There are many factors that lenders consider when making an appraisal home Loan applications, chief among them are income, credit score, credit profile and Equated Monthly Installment (EMI) affordability. In such cases, joining an earning member of the family with a good credit score as a co-applicant can enhance the loan eligibility.

Ratan Choudhary, Head of Home Loans, Paisabazaar.com, said, “Adding a co-applicant reduces the credit risk for lenders, given that co-applicants are equally responsible for loan repayment. This process can help improve your chances of getting the loan approved.”

Chowdhary further added, “Lenders also consider the income of the loan applicant while calculating the EMI affordability. Adding a co-applicant can help in getting a larger loan amount. Also, since most of the lenders require borrowers to get 70 per cent loan amount. Loans are required to be repaid by the age of 60, loan applicants approaching their 60s may be either rejected or asked to opt for shorter loan tenure and higher EMIs.A young co- Linking the applicant can help such borrowers to get loans with longer tenure.”

Higher Tax Benefit: Repayment of home loan is eligible for income tax deduction. Repayment of interest component up to ₹2 lakh for self-occupied property is eligible for tax deduction under section 24B of the Income Tax Act. Similarly, till the repayment of the principal component ₹1.5 lakh each financial year is eligible for tax deduction under section 80C. Both the primary applicant and the co-applicant can avail these tax benefits independently as per their contribution towards loan repayment. “Adding a co-applicant can help in getting higher overall tax benefit. However, note that co-applicants can avail tax benefits related to these home loans only if they are co-owners of the property concerned,” Choudhary said.

Avail lower interest rates for female co-applicants: Many home loan lenders offer concessional home loan interest rates to female co-applicants. BankBazaar.com CEO Adil Shetty said that many banks and non-banking financial companies (NBFCs) offer their lowest home loan rates to women borrowers. Year after year, we have seen that women take a larger home loan on an average than men.

“Women are moving forward not only as primary borrowers of these home loans but also as co-applicants for loans taken by their husbands. Lower rates make it easier for families to clear their dues quickly,” Shetty said.

Repayment Flexibility: While both the primary applicant and co-applicant are equally responsible for the home loan repayment while availing a joint home loan, they have the freedom to share the EMI repayment burden.

Cons of Combined Home Loans

Adverse impact on credit score in case of non-payment of EMIs: You must be aware that the co-applicants of the home loan are equally liable for timely repayment of the loan. In addition, the credit bureau also captures any delay or lapse of home loan EMIs in the credit reports of both the primary applicant and co-applicant. So, in this way, it can negatively affect the credit scores of the primary applicants and co-applicants.

Shetty said, “Keep in mind that any problem between the co-applicants can lead to difficulty in repaying the loan, which can affect the credit history of both the borrowers. Their property can be taken back.”

Who can qualify for a co-applicant in a home loan: Lenders usually only allow the primary applicant’s spouse or other immediate blood relatives to be co-applicants, but some lenders allow siblings or unmarried partners Cannot approve joint home loan. Lenders usually require all the co-owners of the property to be co-borrowers of the home loan.