Looking at buying a house. It is one asset that one longs to invest in. Most of the times people apply for a home loan taking a co-applicant. Having a joint loan owner makes a lot of financial sense. It increases the eligibility and may help in shifting in a better property than one that would have been bought with a single borrower. Also, people tend to have a joint applicant to cover the legal rights of the property. However, there are some points that one should be aware of before one applies for a joint home loan. Read on to have a better understanding on this.
Only a few relationships are allowed to be join applicants
One just cannot take anyone as a joint applicant. The eligibility of joint applicant is restricted to a few relationships only. Wife or parents are the relations that get accepted easily on this. The brothers while can still become joint applicant, sisters are generally avoided. This is for banks to safeguard any disputes if any may arise in future. The prospective bride and grooms are also not permitted to be eligible for a joint home loan. So in case you are unmarried you would need to be clear on the requirements on this front.
KYC and income documents of all joint applicants are required
In case of joint applicant, all the co-applicants would need to furnish their KYC and income documents. So please be wary from taking a joint applicant who does not have valid KYC or the income documents. Generally the co-applicant helps in increasing the eligibility and in the absence of required income documents having one may not be of much use. So please plan for this in advance. In case of inadequate documents, the loan application my just get declined.
Liability of repayment
You must be aware that all applicants are fully liable for the repayment of the complete loan amount. In case of any untoward incident where the repayment from the primary applicant’s account stops, the other applicants are liable to clear the dues to the last rupee. This will not get impacted by the ownership into the property. So if there are 2 joint applicants with equal ownership i.e. 50% each, the secondly applicant would be liable to pay complete loan amount if the primary applicant is unable to pay up. The bank does not want the names to be updated on loan defaulter list but expects smooth repayment irrespective of the co-borrower clearing it.
Joint applicant do not need to be co-owner
While all co-owners necessarily need to be co-applicants, in case of single owner, the same may not be the case. The blood relation and spouse can be taken as a joint holder of the loan even if they do not have any property rights. But one word of caution, they will have the responsibility of paying complete outstanding if the property owner defaults for any reason.
The EMI can be paid from one account only
The EMI cannot be split between the co-applicants. This has to be coming in from one account only. As mentioned above, while the monthly installment gets served from one account only, the co-borrower will be equally responsible for repayment. The onus on clearance of the outstanding amount lies with all the borrowers.
Both the applicants are entitled to tax rebates
While joint application will not impact home loan interest rate, the tax benefits available to all the borrowers will be of interest to all the applicants. The home loans are entitled to a tax relief by the government. Both the principal amount paid over one financial year and the interest amount paid bring relief on tax. These tax sops are available to all the co borrowers.
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