A home is a lifetime investment for many in India. So, the buyer wants to ensure that the house they buy meets all their requirements - convenience, location, size, quality of materials used and more.
Fortunately, this dream can now be easily realised, through the availability of home loans at affordable rates and terms. However, to get a home loan approved you have to meet various key eligibility criteria like age, income levels, credit score, current loans outstanding, etc. When applying for a home loan, the lender may prefer to add a co-applicant to your home loans. This could be for different reasons and loans taken with a co-applicant are known as joint home loans. There are various benefits of taking a joint home loan.
In this article, we list the key reasons to apply for a joint home loan.
3 Key Reasons to Take a Joint Home Loan
Eligible for Higher Loan Amount
When you add a co-applicant to a home loan and if that co-applicant is an earning member, then the lender would consider both your incomes for deciding on the loan amount. As such, you will be eligible for a higher home loan amount in a joint loan account than when you apply as an individual applicant. This gives home loan applicants or their families the benefit of a larger home loan amount. This could help them to purchase a home as per their requirement due to the increase in the budget available through the joint loan application.
To get the benefit of low-interest rates on a home loan, the individual borrower can consider adding their spouses or mother as co-applicants in a joint-home loan application and as a joint property owner.
Women customers have this added benefit in India as they are offered loans at a lower rate of interest, which is normally 10 to 25 basis points lower than the normal home loan interest rate offered to male borrowers. To get this benefit, a woman borrower has to be the sole or joint-owner of the home and should be an applicant or co-applicant in the home loan application.
Higher Tax Benefits
Another key benefit of a joint home loan is higher tax benefits which are available to all the co-applicants separately. To get this tax benefit, co-applicants should also be property owners and should actively contribute to EMI payments for the repayment of the home loan. The tax benefits which can be claimed individually by home loan co-applicants are:
- Any repayment towards the principal amount of home loan is eligible for deduction under Section 80C of the Income Tax Act, 1961 up to a maximum limit of Rs.1.50 lakhs.
- Interest payment on home loans is eligible for tax deduction under Section 24 of the Income Tax Act, 1961
- Up to a maximum amount of Rs. 2 lakhs, if the property is self-occupied
- In the case of a let-out property, the entire interest payment towards a home loan is eligible for tax deductions
- Each co-applicant is eligible individually for claiming the above deductions as per the proportion of their contribution towards the monthly EMIs, with respect to principal and interest, subject to the limits as specified above.
A home is a lifetime achievement for many. Therefore, it is prudent to invest properly in this one-time prized possession. Going in for a joint home loan application would help you to realise this dream more easily due to the availability of higher loan amount, lower interest rate, if you have a women co-applicant and higher tax benefits which can be enjoyed by individual co-applicants, provided certain conditions are met.
1. Can a person with a low credit score apply for a home loan?
A person with a low credit score should avoid applying for a home loan as a low credit score would lead to rejection of their home loan application. Even if your loan application is approved, the rate of interest will not be favourable. So, it’s highly recommended that you work on improving your credit score before applying for a home loan.
2. Can a person who is not a co-owner claim tax benefits for a joint home loan?
To avail of the tax benefits for a home loan, it is necessary that you must be the owner or co-owner of the property. Even if you are co-applicant to a home loan, if you are NOT the owner or co-owner of the property, then you can not avail of the tax benefits.
3. Can I claim tax benefits on a partly constructed house property?
To claim the tax benefits on a home loan, it is essential that the construction of the house/ property should be completed. Tax benefits on a house property can be claimed only in the financial year when the construction of the house property gets completed. Therefore, tax benefits cannot be availed for an under-construction property. But, the Income-tax Act provides the benefit of considering prior completion expenses in five equal instalments as expenses starting the year in which construction of the house gets completed.
4. If the co-applicant is not making a contribution towards EMI payment, can they claim tax deductions?
A co-applicant can claim tax deductions only if they have contributed actively to EMI payment on a regular basis. They can claim tax benefits according to the proportion of their contribution towards home loan interest and principal in a financial year.
5. Can stamp duty and registration charges to the property be claimed by joint owners to the property?
Yes, stamp duty and registration charges to a property can be claimed by joint owners to the property.
6. When should you avoid applying for a joint home loan?
Under the below circumstances, avoid applying for a joint home loan
- When your eligibility as a single home loan applicant meets the overall home loan requirement
- Your co-applicant has a low credit score
- You are repaying an existing loan to your maximum loan eligibility
- Your retirement is due shortly