Everyone yearns for a place to call home. In most of the Indian cities, buying a home is still a distant reality for many people. With a stellar credit score and steady income, you may not face much difficulty in buying a house.

However, for those who cannot fulfil such eligibility criteria laid down by the lenders, a co-applicant can be an advantage while applying for a home loan. CreditMantri has put together all the information you need to know about being a co-applicant in Home Loan.

Who Is a Co-Applicant in Home Loan?

A co-applicant in Home Loan is an individual who has an equal responsibility in repaying the loan just like the main borrower. As per the banks’ rule, the co-applicant must be blood relatives or immediate family member. The lending institutions allow up to 6 co-applicants in buying a property.

It is not necessary that a co-applicant must be the co-owner of the property purchased. But the co-applicant is held accountable for repayment and for any legal dispute later.

Combination of Co-Applicants

The lenders allow the following combinations to be co-applicants.

Husband and Wife: The is the most preferred combination of co-applicants by the banks. In this case, both can jointly own the property and both their income are considered for eligibility and approval. They can split repayment as per their convenient and get tax benefits accordingly. The tenure of the loan depends on the retirement of the older person.

Father and Son: In this category, both can jointly own the property if the father has only one son. If there are more than one, he cannot become the owner but can be a co-applicant. This is to avoid any potential family dispute after his death.

Father/Mother and Unmarried Daughter: In this case, an unmarried daughter can only be the owner of the property, and either her father or mother can be co-applicants, but their income cannot be considered together.

Brothers:Brothers in a family can be co-applicants and buy a house together. This is allowed only when both stay together in the purchased property and are co-owners.

Unaccepted Combinations:

  • Father/Mother and Married Daughter

  • Brother and Sister

  • Sister and Sister

Advantages of Having a Co-Applicant?

Low Interest Rate and Quick Approval: If the co-applicant, who also becomes the co-owner, has good credit score, you are likely to enjoy reduced interest on your home loan. Moreover, the loan is approved as quick as possible.

Tax Benefits: The borrower usually gets tax benefits from the home loan. The co-applicant is entitled to receive tax benefits only if he is a co-owner of the property.

Increased Eligibility: As a co-applicant supplements your eligibility with his/her credit score and income, the success rate of approval is higher.

Things to Know Before Becoming a Co-Applicant

  • As a co-applicant, you are equally responsible for the repayment of the loan during the entire tenure. If the main borrower defaults or refuses to pay or dies, you will be held accountable.

  • You credit score takes a hit if the applicant has any problem with the payment.

  • Possible legal dispute in case when a husband and wife decide to get divorced

  • Read carefully the terms and conditions and do not sign if you are doubtful of any clauses

Conclusion

Being a co-applicant is beneficial only when you are a co-owner of the house. Hence give a careful thought before you decide to become a co-applicant in home loan.

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