6 facts to know about joint home loans

Posted by Bhavna Singhal on September 26th, 2019

Young adulthood marks the beginning of a journey to leave behind the known and follow the unknown world. Finding a well paying stable job, owning a house and a decent vehicle and finally settling down in life are the earmarks of a successful life. Owning a home with co-applicant is one of the best financial decisions one can make to secure its future and further investments. 

Anyone with a steady income and clear credit score can begin their journey of owning their own home. 

Applicants can seek co-applicants under one home alone, provided that all applicants have proof of regular income and intention of repaying the loan. With the help of parents, spouses, or siblings (brothers) banks and NBFCs offer joint bank home loans to applicants. A co-owner is the one who has a share in the property, and a co-borrower is the one responsible for paying back the mortgage. Few banks permit brothers for a joint home loan as long as both of them are co-owners on the said property, in case of spouses co-ownership is not necessary, whereas parents and siblings have a co-ownership requirement. On the other hand, friends, sisters, and unmarried couples can be co-owners, but not co-owners of a property in a housing loan. 

Joint Home Loans have various benefits, some of which are listed below: 

1. Tax Benefits: All co-borrowers can declare tax deductions under section 24 against interest repaid and under section 80C against the principal amount refunded. Couples as both partners most enjoy the benefits of a joint loan can claim a tax deduction on the principal amount and interest paid from their respective incomes. 

2. Location Matters: A joint loan gives you the freedom to choose the location of your choice. The more applicants you have, the higher the chances of you securing a considerable loan amount. Owning a house of choice with a budget to spare is a dream that can be fulfilled with the help of banks and NBFCs. 

3. Woman Power: The housing loan interest rate on home loans for women is relatively lower, which gives them the option of securing a high amount for the loan. Having a co-applicant can help smooth the process further and give women financial freedom. 

4. Co-Ownership: The benefits of having a co-owner can be many, and the most crucial advantage of all is sharing the burden of repaying the loan. No matter what your share in the property might be, all co-owners are implicated in paying back the mortgage with interest in equal parts. 

Two major disadvantages of joint loan applicants you must be aware of are: 

1. In case of divorce or a partner ceases to exist: Getting the loan approved and having your spouse as a co-applicant is the first step toward owning your house, but you do not entirely own the property until you have successfully paid back every penny of your loan. Incase partners files for divorce and chooses to opt-out of the loan or one of the partners ceases to exist; the sole responsibility of paying back the loan falls upon the first applicant. Getting out of loan repayment is not an option, but there are ways to share the burden even though a partner fails to keep his/her end of the deal. It is advised that partners opt for separate term plans or life insurances, so when one partner as deceased, all the financial burden does not fall on one person. 

2. Paying Tax on No Income: Owning more than one property means investment for the future, as you will be residing in only one property, according to the Income Tax guidelines, the other features in your name will be by default considered rented-out. Even though you may not have rented out your property, you are still liable to pay tax on an income you are not receiving according to present market rates on the rent incurred from other features. 

There are pros and cons to every loan scheme, whereas joint home loans have their disadvantages, the advantages weigh them out for everyone to fulfill their dreams.