The Benefits of Applying for a Joint Home Loan
Jun 14, 2023Investments

The Benefits of Applying for a Joint Home Loan

by Godrej Properties Limited

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Introduction

Owning a home is a cherished dream for many individuals and families. However, the rising property prices can make it challenging to fulfil this dream on your own. This is where a joint home loan application can prove to be a game-changer. In this article, we will explore the advantages of a joint home loan application and how it can help you turn your dream of owning a home into reality.
Increased Loan Eligibility

One of the significant advantages of applying for a joint home loan is the potential for increased loan eligibility. Lenders assess the loan eligibility based on the income of the applicants. By including a co-applicant with a stable income, you can significantly enhance your combined borrowing capacity. 

Lower Interest Rates

Joint home loan applicants also have the advantage of accessing lower interest rates. Lenders often offer preferential interest rates for joint applications, considering the combined financial stability of the co-applicants. This can result in substantial savings over the loan tenure, making homeownership more affordable in the long run.

Shared Financial Responsibility

By applying for a joint home loan, you share the financial responsibility with your co-applicant. This can help ease the burden of repaying the loan and managing monthly instalments. Additionally, it provides a safety net in case one of the co-applicants faces financial challenges. 

Increased Tax Benefits

Joint home loan applicants can also enjoy enhanced tax benefits. Both co-applicants can claim tax deductions on the principal and interest portions of the loan repayment, subject to certain conditions. This helps in reducing the overall tax liability, allowing you to save more money in the process. 

Improved Credit Profile

Collaborating on a joint home loan can have a positive impact on your credit profile. Regular and timely repayments can boost your credit score, which is crucial for future financial endeavours. By maintaining a good credit history together, both co-applicants can enhance their creditworthiness and improve their chances of securing loans or credit in the future.

Key Advantages of Taking a Joint Home Loan

Joint home loans offer several advantages:

  • Higher Loan Amount

Applying for a home loan with a co-applicant increases the chance of getting a higher sanctioned loan amount. With two incomes considered in the application, you can expand your budget and choose the home you desire without compromising due to loan interest rates or financial constraints.

  • Easier Repayment

Sharing the responsibility of repaying the loan between two applicants makes the repayment process more manageable. Having a co-applicant can bring peace of mind, and the shared financial burden makes handling home loan interest and EMIs less stressful. 

  • Quicker Debt Repayment

With two incomes contributing to the finance for a home loan, you can opt for higher monthly EMIs. It allows you to choose a shorter loan tenure when applying for a home loan, such as 20 years or less, saving money on interest rates associated with longer tenures.

  • More Tax Benefits

Tax benefits on the principal and interest of the loan are available under Section 80C of the Income Tax Act. It's essential to note that the co-applicant must also be a co-owner to access these tax benefits.

Caveats

Here are situations when you should avoid a joint home loan:

  • If your eligibility for a home loan as a single applicant meets your loan requirement
  • When you have a low credit rating due to a poor credit history
  • If you are already repaying a loan according to your maximum eligibility
  • When you are purchasing a lower-value property, especially for investment, and plan to buy a larger property for self-occupancy in the future.
  • If you are about to retire shortly

Documentation

Both primary and co-applicants must provide necessary documents, such as:

  • Identity Proof: Aadhaar card, passport, voter ID, or driving license.
  • Address Proof: Aadhaar card, passport, or utility bills.
  • Income Proof: Salary slips or income tax returns (for self-employed individuals).
  • Property Sale Documentation
  • NOC (No Objection Certificate) of the Property.

The Final Word

Applying for a joint home loan is a smart move for individuals and families aspiring to own a home. The advantages of increased loan eligibility, lower interest rates, shared financial responsibility, increased tax benefits, and improved credit profiles make it an attractive option. However, it is crucial to choose your co-applicant, consider their financial stability, and ensure effective communication and financial planning throughout the loan tenure.


Frequently Asked Questions

1. Can anyone be my co-applicant for a joint home loan? 

Ans: Most lenders allow immediate family members like spouses, parents, and siblings to be co-applicants. However, it is essential to check with the specific lender regarding their co-applicant policies.
2. Can I include a co-applicant who is not earning an income? 

Ans:  Yes, even if your co-applicant is not earning an income, their presence can still increase your loan eligibility. However, it is advisable to consult with the lender to understand their specific requirements.

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