Joint Home Loan
Home Loan Co-Applicant, Co-Borrower and Co-Owner are some of the common terms which we come across in discussions regarding Home Loans. Broadly speaking home loan co-applicant or co-borrower is one and same thing i.e. a person who shares the equal responsibility towards the repayment of the Home Loan. Such type of Home Loans are called Joint Home Loans.
Co-Owner however is the person who has share in the property i.e. rights in the property. A co-owner of property can be co-applicant in Home Loan. It is not necessary that co-applicant of Home Loan is co-owner of the property.
Advantages of Joint Home Loan:
- Increased borrowing capacity
The lenders will consider income of all the applicants, and thereby, increase the loan eligibility value.
- Tax Benefit
Under section 80C of Income Tax Act (IT-Act), a home loan borrower is eligible for tax benefit of principal repayment of up to Rs 1 lakh and Rs 1.5 lakh of interest repayment under section 24 of the same act. In case of a joint home loan, both the applicants (provided they are co-owners also) can enjoy these benefits proportionate to the extent of contribution towards repayment.
- Additional benefits:
In many states, a lower property registration fee is levied in case the property is owned by women either individually or jointly. If husband and wife jointly own a property, it reduces the succession issues.
Who Can Be A Co-Borrower?
- Joint home loans are offered to married couples or blood relatives (Parents/ Children/Sibling). Generally working members of the family (Husband / wife, father / son, mother/son etc.) apply for joint home loans as their income is taken into consideration for eligibility calculation.
- Repayment of the joint home loan is the responsibility of all borrowers’ of the loans.
Relationship Factor and term of home loan:
- Generally a Joint Home Loan can be taken by a maximum of SIX persons (minimum being two applicants).
- When the spouses are the joint applicants, the term of the loan can be a maximum of 20 years, subject to the retirement age of the older applicant.
- In case the co-applicants are parents and children or siblings, then the maximum term many be 10 years or depending on the age and repaying capacity of the primary borrower. Also, if the parents income is considered for repayment, then the maximum term may be restricted to the retirement age of the older applicant (in this case that of parent).
The repayment process for a joint home loan is similar to that of a regular home loan. It is the collective responsibility of all the borrowers.
- The payment can be made from a single or joint account by way of cheques or electronic clearing system (ECS).
- Co-borrowers can also share the number of EMIs between them such that a specific number of cheques can be issued by one borrower and the balance by the other (some banks/NBFC don’t allow this)
- The repayment record of a joint home loan reflects in the credit score of all co-borrowers. Default in payment by any partner can impact the eligibility for a loan of the other applicant in the future
- If one the co-borrowers fail to pay the EMI then the other will be liable towards payment. In case of any delay or defaults on EMI it impacts CIBIL score of all borrowers and legal action can be taken against the borrower as well as the co-borrower.
What Happens In Case Of A Dispute?
All Home loan applicants should sign a separate Legal Liability Agreement which clearly defines liability of each party and helps sort the situation in case of any dispute. In case of any default, the bank can proceed with the recovery process against all the co-borrowers.