Last Updated on: 2nd January 2025, 03:06 pm
Are you considering purchasing a home? A joint home loan might be the key to making it a reality. By combining incomes with a co-applicant, such as a spouse or family member, you can increase your home loan eligibility and secure a higher loan amount.
Additionally, sharing repayment responsibilities can ease the financial burden, making monthly EMIs more manageable while unlocking tax benefits for both applicants. Explore how a joint home loan can simplify homeownership and boost your savings.
Advantages of Taking Out a Joint Home Loan
Here are some advantages of applying for a joint home loan:
- Increased Loan Eligibility: Applying for a joint home loan allows lenders to consider the combined incomes of all co-applicants, significantly enhancing the eligible loan amount compared to applying individually.
- Shared Repayment Responsibility: With a joint home loan, the repayment burden is shared among co-borrowers. Splitting EMIs makes it easier to manage individual finances, reducing pressure and improving overall cash flow.
- Tax Benefits: Joint home loans offer attractive tax advantages. Co-borrowers who co-own the property can claim deductions under Sections 80C and 24(b) of the Income Tax Act. Each borrower can claim up to ₹150,000 annually for principal repayment under Section 80C and up to ₹200,000 for interest payments under Section 24(b), significantly reducing tax liabilities.
- Favourable Interest Rates: Lenders often provide better interest rates for joint loans, particularly when a co-borrower is a woman. Even a small rate reduction can lead to substantial savings over the loan tenure.
- Improved Credit Scores: Regular and timely EMI payments on a home loan positively impact the credit scores of all co-borrowers, enhancing their financial profiles and easing access to future credit options at favourable terms.
Things to Remember when Applying for a Joint Home Loan
- When applying for a Joint Home Loan, the co-borrower must be a close family member, such as a spouse, parent, or sibling. Friends or unrelated individuals cannot typically be co-applicants.
- To qualify for tax benefits, all co-borrowers must co-own the property. This ensures fair distribution of liabilities and benefits, including tax deductions.
- If one borrower defaults on their share of the EMI, the responsibility to cover the full payment automatically shifts to the other co-borrower(s). This makes trust and financial transparency essential when applying jointly.
- The repayment behaviour of all borrowers affects each co-borrower’s credit score. A default by one applicant can lower the credit rating of all parties involved.
- The proportion of EMI contributions should ideally align with the ownership share in the property. Clarify and agree upon the distribution of payments beforehand to avoid disputes.
- In disputes between co-borrowers, such as divorce or inheritance issues, loan repayment responsibilities and ownership rights might become contentious. Plan for contingencies in advance.
- Consider taking joint loan insurance to cover the outstanding amount in case of unforeseen circumstances, such as the death or incapacity of one borrower.
- Use a Home Loan Calculator for improved financial planning to help you make informed financial decisions.
Conclusion Pooling resources through a joint home loan can significantly enhance the chances of homeownership by increasing loan eligibility, sharing repayment responsibilities, and availing tax benefits. However, it is essential to ensure that co-borrowers meet the required eligibility and property ownership criteria and are prepared for the shared liabilities.
