Lenders consider the credit score, income, employment profile and stability, age and monthly credit obligations while assessing home loan applications. Any failure to meet any of these eligibility criteria can lead to rejection of your home loan application. You may also fail to secure the desired amount in case of restrained repayment capacity. But taking a home loan jointly can help.
Listed below are some crucial points to take into consideration when availing a joint home loan. But first, let’s understand who can be a home loan co-applicant.
The co-borrower of a home loan can be one of your close relations. Lenders usually follow their own criteria when it comes to identifying relations eligible for a joint home loan. In general, they mostly allow spouses, children, parents or immediate blood relatives to become co-applicants of the joint home loan. Some lenders do not accept siblings and unmarried partners as joint home loan applicants. In case of co-owned housing property, all the co-owners of the property must become co-borrowers of the home loan.
Enhances loan eligibility
Looping in a co-applicant, with his/her own income source and good credit profile can enhance your overall loan eligibility. As the co-applicant is equally liable for the repayment of the home loan, it reduces the credit risk for the lender and thereby improves your chance of getting a home loan. As the income of the co-applicant is also considered while evaluating EMI affordability, adding a co-applicant can help you avail a bigger loan amount.
Similarly, as most of the home loan lenders require borrowers to complete their loan repayment by the time they turn 70, those approaching their 60s are either rejected or forced to opt for shorter tenure and, thereby, bigger EMIs. In such cases, adding a younger co-applicant can help avail a home loan with a longer tenure.
Having a co-applicant on board is especially beneficial in case the primary loan applicant has lower loan eligibility due to inadequate credit score, riskier job or employer profile, inadequate repayment capacity or monthly debt repayment obligations exceeding 50-60 percent of the income.
Higher tax benefits
Both the primary applicant as well as the co-applicant(s) of a home loan can independently avail tax benefits as per their contribution towards interest and principal repayment. Tax deduction of up to Rs 2 lakh on the repayment of interest component for self-occupied property under Section 24b can be claimed by both the primary applicant and co-applicant(s). Similarly, they can separately avail tax deduction of up to Rs 1.5 lakh under Section 80C for repaying the principal component of the home loan.
Remember, co-borrower(s) can avail tax benefits only if he/she is also the co-owner of the concerned property.
Lower interest rates for women
Many home loan lenders extend interest rate concessions of 5 bps to home loan applications made with women co-applicants. Given that this 5 bps concession can result in sizable savings over the long term, a female family member should be roped in as home loan co-applicant if the lender offers such interest rate concessions.
Other ways to boost your home loan eligibilityOpt for a lower LTV ratio as it reduces the lender’s credit risk exposure, thereby improves the chances of home loan approval. Moreover, lenders require the total EMI obligations, including that of the new home loan, of the applicants to be within 50-55 percent of their monthly income. Hence, those exceeding the said limit can reduce their EMI obligations by opting for a longer repayment tenure.