Are you looking to buy a property but are not eligible for a loan large enough to cover your expenses? Then a joint loan is a good option for you. A joint loan is one that can be taken by more than one person. Joint home loans can only be applied with parents, spouses or siblings. By clubbing the income of your spouse with yours, you can enhance your home loan eligibility to buy a house.
Important aspects of joint home loans
Co-Borrower :
The person with who you take the home loan is the co-borrower. The term co-borrower is not to be confused with co-owner, the person who also jointly owns the property. Banks generally emphasize that co-owners can be co-borrowers but it is not necessary that co-borrowers should be the co-owners of the house.
There are few basic rules to be followed while applying for a joint home loan. There can be a minimum of 2 to a maximum of 6 applicants for a joint home loan. Banks only grant a joint home loan to married couples, parents and children or siblings. You cannot apply for a home loan with a friend, colleague or unmarried partner.
Documents required :
The applicants are required to produce necessary know-your-customer (KYC) documents such as ID proof, address proof and income proof..
Loan Tenure :
When a spouse is the co-borrower, the term of the loan can be a maximum of 25 years, subject to the retirement age of the older applicant. In case the co-borrowers are parents, children or siblings, then the maximum term can be 10 years. But if the parent’s 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 the parent).
Loan eligibility :
A significant advantage of joint home loans is that it increases your loan eligibility. Incomes of the individuals taking a joint home loan are combined to determine the eligibility and these result in a higher loan amount.
Tax Rebates :
From a taxation point of view, a joint home loan is beneficial as each co-borrower is eligible for tax benefits under Section 80C for principal repaid and under Section 24 for interest repaid. These tax deductions are capped at Rs 1 lakh for the principal repaid and Rs 1.5 lakh for the interest repaid for each individual. To maximize tax benefits, it is advisable to share the home loan such that the co-borrower with a higher tax bracket owns the bigger share.
Repayment Process :
The repayment process for a joint home loan is similar to that of a regular home loan. For repayment, cheques can be issued from either a single or a joint account. Another way of repayment is that the co-borrowers 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.
Hence if both the partners are working it is a wise decision to go for a joint home loan as it has twin benefits of increasing your loan eligibility and maximizing tax rebates.