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29 March, 2024 18:55 IST
Financial Planning
   
Want a Bigger Loan? Apply for a Joint Home Loan
Source: IRIS (18-APR-16)

Buying your own house is a milestone that one wants to reach as soon as possible. However there might be times when this milestone may seem far owing to the spiraling property cost. Of course one can apply for a home loan but what if the loan eligibility is less than what is required to buy the house. A Joint Loan could come to your rescue in such a scenario; below we explain how a joint loan can get you a bigger loan and get you closer to buying the house you want.

What is a Joint Home Loan?

When two or more people decide to apply for a loan together, so that all of them are together responsible for repaying the loan; it is known as a joint loan. The applicants are known as co-applicants; all applicants have to meet the lender's KYC norms, submit the required documents and comply with the other eligibility criteria like CIBIL score etc that is laid down by the bank. Co-applicants are different from co-borrowers; co-applicants apply for a loan together and share the burden of repaying it jointly while co-owners share the property ownership.

Who Can You Apply a Joint Home Loan With?

There are laid down guidelines about who can apply for a joint home loan, generally blood relatives and spouses are allowed to be co-applicants. The rules can vary for different combinations of joint loan applicants. Live-in partners and friends are not allowed to be joint applicants.  Father and son, brothers, husband and wife are some acceptable combinations. Father or mother can apply joint for a loan only with an unmarried daughter and the daughter has to be the first holder in order to prevent any issues that may crop up after the daughter's marriage, brother sister cannot apply for a loan together. If brothers apply for a loan then they have to be co-owners too.

How does a Joint Loan Help you get a bigger Loan?

Mr. Mehta shortlisted a house that would cost him Rs. 1.2 crores and he wanted to apply for a loan of Rs. 90 lakhs. The bank told him that his eligibility was for a loan of Rs. 70 lakhs only. Mr. Mehta did not want to miss the opportunity; so the bank representative suggested that he apply for a joint loan with his wife who also was regularly employed. This could help him get a bigger loan.

Joint home loans offer a few benefits, one of them being higher loan eligibility. Other benefits include better tax planning, better chance of a loan application being accepted and sharing of loan burden. So how does a joint home help you in getting a bigger loan?

When an applicant applies for a home loan, the banker looks at the income, CIBIL score and other factors to assess the repayment capacity of the borrower. Based on this they decide whether they can sanction a loan and if yes what loan amount can be sanctioned. Of course the value of the property is also considered, the lenders will sanction a loan only 80-90% of the property value.

When an applicant applies for a loan singly only his or her income is used to calculate  if he/she meets the income eligibility criteria, when two or more apply together, their incomes are clubbed together to calculate the eligibility criteria.  Higher the income of the applicant/s the more assured the lender is about the loan being repaid and higher is the loan eligibility based on income. Of course the co-applicant/s also needs to be working else there is not point making him/her a joint applicant as he/she does not have a regular stream of income. With more applicants being responsible for paying the loan, servicing a higher loan (bigger EMI/month) is possible which gives the lenders the confidence to sanction a bigger loan.

For the applicants also this has other benefits too; as each can avail the tax deduction that is allowed under Section 80C and Section 24. Under Section 80C, Rs 150,000 can be claimed by all applicants for principal repayment and Rs 200,000 under Section 24 towards principal repayment. When applicants apply joint there is better chance of their application being accepted, both feel more secure as they know there is another person to share the loan burden.

A joint home loan application can get you a bigger loan; however there are various details like EMI sharing ratio, co-ownership, tax planning etc that should be understood before applying for one.

(Contributed by Rajiv Raj, Director & Co-Founder at Creditvidya.com)


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