Do you need to add a co-applicant to your home loan

Having your own home is, without a doubt, an expensive affair. To ease this huge financial burden, you can get a joint home loan that allows you to share loan repayment responsibilities.

If there are co-applicants in your home loan application, this will improve your home loan eligibility. A joint home loan co-applicant can be any of your immediate family members, be it your spouse, parents or siblings. As real estate prices continue to rise, the investment in buying a home can be financially heavy, but it will certainly serve as your long-term savings.

Who is a co-applicant

A co-applicant is, as the name suggests, a person who appears on a joint home loan application alongside the lead applicant, also known as the borrower. Although the law does not require you to have a co-applicant when applying for a home loan, having one increases your eligibility for the home loan and the chances of your application being approved. The lender considers the incomes of both applicants if you are applying for a home loan with a co-applicant. Additionally, since candidate salaries are combined when a co-applicant applies, you have access to a high loan amount. However, when applying for a home loan with a co-applicant, borrowers should be aware of the limitations and conditions.

Who is eligible to co-apply for a home loan

The co-applicants of a solidarity real estate loan must meet particular eligibility criteria and be in certain types of partnerships, depending on the banks and financial institutions. These include:

• • Husband wife: The most desirable and favored pairing is husband and wife. When determining your eligibility for a home loan, the salaries of both partners will be taken into account, which will increase the likelihood of the loan being approved. Couples can also split payments as best suits them and take advantage of tax deductions.
• • Father and son: When there is only one son in the family, it is appropriate for a father and his son to co-apply for the mortgage. As in this situation, the lender takes into account the income of both applicants and they are both listed as legal owners on the property contract. Either of the two can be listed as the primary owner of a joint home loan.

There are certain conditions when it comes to other relationships:

• • When a father or mother and an unmarried daughter apply for a joint home loan, the property must be in the daughter’s name only. This is done to avoid legal problems if the girl gets married. Moreover, in this combination, the income of the father and/or the mother is not taken into account.
• • If brothers are applying for a joint home loan, they must have the same address at the time of application and intend to continue living together in the new home for which they are borrowing money. In this situation, the lenders could require the brothers to be co-owners as well as co-applicants.

Unacceptable combinations:

Now that we know who is eligible to apply for a solidarity home loan, here are the combinations that are not eligible for a solidarity home loan.

• • sisters
• • Sibling
• • Father and a married daughter
• • Mother and a married daughter
• • Couples residing together (couples living in a relationship)
• • Friends/ Cousins

What are the benefits of having a co-applicant for your home loan

1. Increases home loan eligibility

Home loan applicants often find it difficult to get their home loan application accepted due to the strict eligibility requirements set by the bank or lender. The minimum income requirement, creditworthiness, repayment capacity, etc. could be part of the eligibility conditions for the home loan.

Although it may be difficult to get your home loan approved, a co-applicant improves your home loan eligibility. If you are applying with a co-applicant, you may also be eligible for a higher loan amount. Also, your chances of qualifying for a home loan effortlessly increase if you apply with a co-applicant who has a good credit score and strong repayment capacity.

2. Fiscal advantages

Depending on the individual contributions paid to the reimbursement of the joint mortgage loan, each joint mortgage applicant who is also co-owner of the property concerned can separately benefit from the tax advantages.

A tax deduction of up to Rs. 2 Lakhs can be claimed for interest paid on a home loan for independent property under Section 24b, and a tax deduction of up to Rs. 1.5 Lakhs may be claimed for principal repayment under Section 80C per fiscal year.

3. Lower interest rates for applicants

Typically, the concession is worth 0.05% (5 basis points) less than what the other candidates receive. Although this may seem like a small distinction, it is not. Indeed, home loans are sometimes very expensive loans, as well as the interest part alone represents a significant part of the total cost of the loan.

Disadvantages of adding a co-applicant

Financial institutions generally consider each co-applicant’s eligibility and ability to repay. Unless all co-applicants meet the mortgage eligibility requirements, joint mortgages will not be permitted. Therefore, if any of the co-applicants have a lower credit score, an excessive debt ratio or do not meet the lender’s eligibility requirements for any reason, this could negatively influence the approval. of your joint home loan and possibly lead to the rejection of your application.

Conclusion

It is expensive to buy a house and for that you may need a loan to close the deal. A home loan co-applicant can be helpful in getting a loan quickly. A co-applicant also eases the financial burden of the repayment obligation. You can choose from a list of eligible family members to be your co-applicant for a joint home loan. There are also family members who cannot be co-applicants.

Disclaimer: This article is published in association with Bajaj Finance Limited and not created by TNM Editorial. Please do your own research before applying for loans from the above services and seek independent legal/financial advice if you are unsure.