A home is a place where you share happiness with your loved ones. With many banks and financial companies offering home loans, owning your dream home has become easier at attractive and affordable interest rates. However, the real problem occurs in choosing the right options that will help you avail a home loan that best suits your requirements. Moreover, getting a joint home loan will help you to increase your savings and reduce the burden of debt.
What Is A Joint Home Loan?
A joint home loan is nothing but taking a home loan along with another person and having equal financial responsibility. The co-applicants for your joint home loan can be either your spouse, parents, siblings and/or offspring. Moreover, you can get your home loans for a higher amount using joint home loans. And you will also get income tax exemptions for a joint home loan.
Benefits of Availing of a Joint Home Loan:
- Some states charge a lower fee for property registration when you apply for a joint home loan with your wife, mother, daughter or sister.
- You have to make your loan repayment through EMIs from a joint account owned by the co-applicants. This way, it is easier to track the payments as well as enable ease of repayment.
- If you own a property jointly with your spouse, succession and other legal issues will reduce.
- Since the bank combines the incomes of the applicants of a joint home loan, you can easily get your loan approved for a higher amount. Because when there are more than one person, the repayment capacity becomes higher. Therefore, if the income is higher with a good reputation, you can easily get a loan for a higher amount.
- Equal liability for repayment: If any one of the applicants is unable to repay the EMI on time due to unexpected situations, then the other person has to repay the due amount without defaulting.
Advantages of Joint Home Loan In India:
The biggest loan you might ever take in your life would be the home loan or joint home loan. The reason is because of growing real estate prices where a simple 2BHK house in an urban locality costs more than Rs.25 lakh these days. The bigger the city, the costlier it’s real estate. So naturally you will have to take out a huge loan to buy your dream house. Moreover, even if you have savings to invest on your house, it may not be sufficient. And if the bank rejects your loan application claiming that your current income is insufficient, you can take a joint home loan to suffice the income requirement.
So Why Take A Joint Home Loan?
So here are 2 major advantages in availing joint housing finance. They are:
Higher Loan Amounts:
For example, if you are planning to buy a house that costs around Rs. 1 crore, for which you need a loan amount of Rs. 75 lakh. Then the EMI of this loan will be around Rs. 64,000 per month for a tenure of almost 30 years. But if your monthly income is Rs. 60,000, it will be below the EMI amount. So the chances of your loan getting rejected are higher. In such situations, having a co-applicant can increase your chances of getting the loan.
You can get tax benefits on your home loan if it is a self-occupied property. These benefits include a tax break on repayment of your principal amount under Section 80C and tax deductions on interest payment under Section 24 of the Income Tax Act. Usually, under Section 80C you can claim a tax deduction up to Rs. 1.5 lakh, and under Section 24, you can save taxes up to Rs. 2 lakh. And in a joint home loan, both borrowers can get tax breaks individually. So on a loan that will give you a total tax break of Rs. 3.5 lakh, you can claim a total tax deduction of Rs. 7 lakh – Rs. 1.5 lakh each under Section 80C and Rs. 2 lakh each under Section 24 for a joint home loan.
Also Read: Now Get Tax Benefits on Home Loan
Know This Before Applying For Joint Home Loan:
Here are points you must consider before you decide on a joint housing loan:
- You should not take a joint housing loan with any unknown person, or even a business partner. Only close relatives like your spouse, parents, siblings or children – can be co-borrowers in a housing finance.
- For a joint home loan, a maximum of 6 members and a minimum of 2 members can apply. However, the number of co-applicants depends on the bank’s rules and regulations.
- To get the benefit of higher loan amounts and tax exemptions, your co-applicant must also be an earner too. The co-borrower can be salaried or self-employed, have a business or a profession. So if you plan to make your homemaker mother the co-applicant, then neither of the above will be available to you.
- To avail the benefits of tax exemptions, your co-applicant must also be a co-owner of the house. The tax breaks will be done on the ratio of ownership – 50:50, 75:25, etc. – which the lending bank certifies showing the distribution of the principal amount and interest rate for the EMI. So if your spouse has a high income, it would be good to have a high percentage of the loan amount and interest in your spouse’s name so that she/he can get higher tax exemptions.
- The tax breaks will be given to you only after the construction of the house is complete. So if you are buying a property that is under-construction, you cannot claim your tax benefits until you begin living in the house.
- Joint owners can easily claim stamp duty and registration charges of a property.
- Each co-applicant has to fill in a separate loan application form and also provide individual documents for the same loan.
- Repayment for a joint housing loan plan can be done either using a joint account of the co-borrowers, or by splitting the EMI equally among them. You can also opt for a cheque or electronic clearance/standing instruction to your bank, as per your convenience.
- A dispute in repayment or ownership of the loan can affect both the applicants, even if the fault is done by only one of them.
- It would be better for each applicant to get a separate life insurance policy in order to easily cover the loan burden if in case either of the borrowers dies.
Unless you completely don’t trust your close relatives, there is no reason for you to not take a joint home loan. Moreover, it gives you a higher eligibility for the loan scheme and allows you to claim tax deductions. And none of the other loans give you so many benefits.
Eligibility And Documentation For Joint Home Loans:
Before understanding the eligibility criteria it is first important to understand who a co-applicant is. A co-applicant also known as a co-borrower is the partner with whom you intend to apply for a home loan. The co-applicant can either be your parents, spouse, children or siblings.
And when you are applying for a joint home loan, both the applicant and the co-applicant must submit relevant documents required for processing the loan application such as: a copy of the Permanent Account Number (PAN), income proof, address proof, property documents and bank statements.
Tax Benefits on Joint Home Loan:
One of the biggest highlights of taking a home loan is that it helps you in making tax savings, when you invest in a fixed asset. And this will ultimately reduce the overall cost of getting a loan considerably. Under Section 80C and Section 24 of the Income Tax regulations, those who get a home loan are eligible to get tax exemptions.
So in order to claim the tax benefits on your property, you must fulfil certain conditions such as – The individual/co-applicant should be a co-owner of the property as well as the co-borrower nominated in the loan application must be eligible. The tax benefits are usually divided between the co-applicants in a joint loan and the division is done according to the ratio of the property owned by each co-applicant. Moreover, there are two types of tax benefits that the borrowers get during the repayment of their home loan. These are:
- You can get a tax deduction of up to Rs. 2 lakh per annum on interest paid on a home loan, under Sec 24.
- Under Sec 80C, you can get a tax deduction when repaying your principal amount for up to 1.50 lakh.
Also Read: Now Get Tax Benefits on Home Loan
Here Are The Tax Benefits For Joint Home Loan:
- The co-applicant who is also the co-owner of the property can claim a tax deduction up to Rs 2,00,000 on the interest paid on the home loan. However, the property must be the only property owned and it must be self–occupied or vacant. And if the property is given on rent, then the whole interest can be taken for a tax deduction.
- Under section 80C, the co-owners can claim a tax deduction up to Rs 1,50,000/-, towards the principal amount repayment.
One important feature of the tax exemption that can be availed is that tax benefits on home loans for interest as well as principal repayment can be claimed only after the construction of the property is completed. And if the property is still under construction, the tax benefits will not be applicable.
Loan Tenure of A Joint Home Loan:
A loan tenure depends on a few factors which is explained below:
- If the co-applicants are a married couple, the tenure for loan repayment can be as high as at up to 20 years but it is restricted to the retirement age of the older applicant.
- If the co-applicants are parents, siblings or children, then the maximum tenure for loan repayment for joint home loans is up to 10 years.
- Moreover, if your parents are co-applicants and their income is taken for repayment, the maximum tenure for loan repayment will be restricted to the retirement age of the oldest applicant. Hence, the tenure will become shorter than in the case of taking a joint home loan with your wife, siblings or offspring.
Repayment process of A Joint Home Loan:
As mentioned, repayment of a joint home loan is a collective responsibility of both the borrower and the co-applicant. So one can pay the EMI for a home loan monthly or create a joint account to make repayment more convenient. Moreover, the borrowers have the responsibility and freedom to choose the best tenure which would be feasible for them.
With banks and financial companies offering home loans, owning your dream home has become easier at attractive and affordable interest rates. However, choosing the right options that will help you avail of a home loan that suits your requirements. Moreover, getting a joint home loan will help you to increase your savings and reduce the burden of debt. Therefore, a joint home loan is worth it since it has many benefits when compared to a regular home loan.
So, if you are looking for a higher loan amount, get a joint home loan with your family members. However, you or the co-applicant must pay the EMIs scheduled, since any delay or default in EMIs can lead to unnecessary legal action taken against the borrower as well as the co-borrower. So always remember that the risks and the benefits are equal for both.