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Can I add a co-applicant to my application? What are the pros and cons of adding a co-applicant to my Home Loan application?

If you are applying for a home loan, you can consider the possibility of doing so along with a co-applicant as long as he or she is not a minor. There are also specified relations that are allowed to co-apply for a home loan. Here is all that you need to know about co-applying for a home loan.

Who can be a co-applicant?

In order to increase one’s loan eligibility a borrower may want to apply for a loan jointly with a co-applicant. Since both salaries/financial abilities are taken into consideration, the eligibility automatically increases. However, lenders will accept only certain relationships as per their stipulations. Here are some possibilities of who can team up.

Husband and wife

In this day and age, most young working couples aspiring to build their own home, consider the possibility of taking a joint loan in order to have a better home with higher loan eligibility.

Father and son

If an only son applies for a loan he can do so with his father, where the father’s income will also be taken into consideration. Both father and son have to be co-owners of the property. It does not, however matter who the main owner is, because it is taken for granted that the only son will inherit the property as the legal heir.

Father and sons

In case an individual has two or more sons, he can opt to jointly apply for a loan with one of them. He should not however be the main owner of the property in such a case. Upon his demise all his children become his legal heirs and should have an equal right over the property. In such cases the father may be a co-owner or may not own the property at all.

Father and unmarried daughter

An unmarried daughter can apply jointly with her father, but in such a case only her income and not that of her father’s is considered. Also, she must necessarily be the owner of the property in case of a subsequent marriage.

Brother and brother

Two brothers can jointly apply for a loan, in case they are staying together and intend to do so in the future as well.

Pros of taking a joint home loan:

  • Firstly, it enhances your loan eligibility and you can therefore consider looking at a better property than you would as a single applicant.
  • Both borrowers get the income tax benefit. Tax benefits of home loans are classified under Section 80 C and Section 24 of the Income Tax Act. Each borrower therefore becomes eligible for a maximum deduction of Rs 1 lakh for repayment of principal (under section 80 C) and Rs 1.5 lakhs for the interest payable (under Section 24). There is an additional exemption under section 80EE of Rs 1 lakh in interest for first time home buyers taking loans less than Rs. 25 lakhs in the finance bill 2013.
  • If you and your spouse earn equal incomes, it will be wise to opt for an equal ownership so that you can get the maximum tax benefits.

Cons of taking a joint loan

  • If both spouses are applying for a joint loan, it becomes impossible for either to take a mid-career break, because they are locked into high debt.
  • If the primary borrower defaults, passes away or files for insolvency (is the inability of a debtor to pay back the debt), the co-applicant has to take on the entire burden of the loan.
  • Joint loans have a bearing on your CIBIL score. If there is an irregularity of payment by one of the applicants, it will have a negative impact on your credit score as well.

So before you take a joint loan, ask yourself if you are truly ready to get into a joint commitment to repay the debt. Also, if you are applying for a home loan with your spouse, sign an agreement in the presence of a legal counsel about the terms and conditions of splitting the property in case there is a marital dispute later.