You must be aware that there are options of applying for home loan in joint names, but do you know what are the benefits of doing so? Sometimes, income of an individual may not be enough to secure the loan amount he/she requires. If you want a larger amount of loan and if you and your husband/wife or son are earning, then you have reasons to be happy as income of both can be taken into account for working out the repaying capacity. You can apply for loan in joint name, which is treated as the joint loan application, with one person as main applicant and another as co-applicant. |  |
Co-Applicant: A Co-applicant is a person who joins the main applicant in applying to the lender as co-borrower for a loan. Usually, spouse is made co-applicant. Other immediate family members are also accepted as co-applicants by the housing finance institutions, depending on merits. In cases where property is owned jointly or by other than the borrower, most lenders insist that the owners of the property, against which a loan or a financial assistance is being sought, become co-applicants. It means that all the co-owners of the property should be co-applicants. However, all co-applicants need not be co-owners. Applying for loan in single name: When you apply for a loan in your own name, i.e., in single name, banks/HFCs will be keen to know your eligibility for loan and your repayment capacity. The eligibility criteria for loan can be defined as a set of terms and conditions that needs to be fulfilled by an applicant applying for loan. The criteria vary from HFC to HFC. Basically, it depends on host of factors such as nature of loan, amount of loan, income of the applicant, financial status of the applicant, his/her age, qualifications, number of dependants, spouse's income, assets, liabilities, stability and continuity of occupation, income, expenditure and savings history. |  |
The bank or the HFC, from which an applicant is taking loan, checks the profile of the customer by tracking the record of his income and expenditure pattern and determines his repayment capacity. For instance, if your monthly income is Rs 10,000, and your monthly expenses are Rs. 8,000, you can pay around Rs. 2,000 towards the home loan you propose to take. As a thumb rule normally most of the banks/HFCs have a provision that one should be left with at least 50% to 60% of income after repayment of monthly loan installment, to take care of the family expenditures. Thus, to prove to be eligible for loan, an applicant should maintain proper record of the pattern of his/her income from employment or business as the case may be, expenditure over the years and record of savings including bank account statements, insurance policies and others. Most of the banks/HFCs keep income disclosed in the Income Tax Returns in mind while deciding overall income, savings and consequent eligibility for the loan applied by the borrowers liable to income tax. Benefits of applying jointly for loan: In comparison to applying for loan in single name, applying jointly has certain advantages. The benefits of availing a joint loan are two-fold — increase in the quantum of loan in view of the heightened repaying capacity and by extension, greater security for the lender in view of the option to take recourse to either of borrowers. In fact, this is the reason why banks/HFCs are comfortable in lending to joint borrowers. Besides improving your loan eligibility and enabling you to get a larger amount of loan, co-borrowers are eligible for deductions under the Income Tax Act. Both the borrowers can claim deduction, to the extent of their share in the loan, under Section 80C of the Income Tax Act 1961 for repayment of loan, subject to the condition that they are joint owners as well. Section 24(b) grants deduction for interest up to Rs 150,000 per year on a loan for acquiring a residential house. This deduction is available individually to both the co-borrowers. To be eligible for the deduction, the home loan needs to be taken in joint names, property be owned and financed jointly in equal shares, with both spouses being joint owners. Besides this, even on the home loan front, a joint loan application will also help a couple acquire a larger loan.
All the co-borrowers or joint-borrowers are jointly and severally liable to repay the loan availed from the bank/HFC, subject of course to the terms and conditions stipulated in the loan agreement. Thus, before volunteering to become co-applicant in a loan transaction, it is advisable to properly understand the implications of such decision. |
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