You want to buy your dream home. You apply for a home loan.
The bank rejects the application saying you are not eligible for such a
high amount as your income is low. This is where a joint loan becomes
useful.
A joint home loan will allow you to get a higher loan as
the income of co-borrowers will be considered. The number of people who
can avail a joint home loan can be anywhere between 4 and 6, depending
on their individual credit profiles.
WHO ALL CAN APPLY?
Joint
home loans can be taken by an applicant along with a spouse. You can
also apply jointly with parents or siblings, but there could be certain
conditions which you need to check with the bank beforehand.
Ashil Hetty, CEO, Bank bazaar.com says, "A married couple or a parent and
child can take a joint loan. Some banks allow brothers to take a joint
home loan provided they will both be co-owners of the property. Banks
insist that all co-owners of the home must be co borrowers in a joint
home loan.
However, sisters, friends or unmarried couples living together are generally not allowed to take joint home loans by banks.
LOAN ELIGIBILITY
The
home loan eligibility goes up in the case of joint home loans as the
repayment capacity goes up depending on the income of the co-applicant.
For example, assume you would like to buy a property worth Rs 1 corer.
The bank is ready to fund 80% which is Rs. 80 lakh. Suppose your income
does not meet this requirement, then you will be forced to look at a
house which costs less. However, if your spouse is working, then both
your income as well as your spouse's income will be considered to
determine the loan amount.
Rena Sud, managing director, HDD,
says, "If a women is a first applicant /co - applicant and sole or joint
owner of the property then applicants can avail the home loan at 5 bps
below the normal applicable home loan rate."
About 35% of monthly
income as EMIs for all debt is ideal. Anything more than that could
cause trouble, especially when your EMIs rise due to an increase in
interest rates.
REPAYMENT PROCESS
The repayment
process for a joint home loan is similar to that of a regular home loan.
The payment can be made from a single or joint account by way of
cheques or electronic clearing system (ECS).
Co-borrowers can also
share the number of EMIs between them such that a specific number of
cheques can be issued by one borrower and the balance by the other.
Most importantly, repayment of the joint home loan is the collective responsibility of all the borrowers.
Always
remember to pay the EMIs as per schedule. If one of you fail to pay the
EMI then the other will be liable towards payment. In case of any delay
or defaults in EMI, legal action is taken against the borrower as well
as the co-borrower.
WHAT HAPPENS IN CASE OF A DISPUTE?
All
home loan applicants should sign a separate Legal Liability Agreement
which clearly defines liability of each party and helps sort the
situation in case of any dispute. In case of any default, the bank can
proceed with the recovery process against all the co-operatives.
TAX BENEFITS
Both
the applicants can claim tax benefits on servicing of the housing loan.
For example, if co-borrowers are servicing the loan jointly in equal
proportion, then each of them can claim tax benefit of up to Rs 2 lakhs
on interest payment which effectively means they can claim up to Rs 4
lacs jointly which otherwise would have been limited to Rs 2 lakhs only.
This helps them to get the effective rate of interest on their loan
down substantially which is a huge saving.
Sanjiv Bajaj -
Managing Director, Bajaj Capital, says, "One can avail tax benefit on
home loan up to Rs 1.5 lakh under Section 80C and 2 lakh under Section
24. But if you go for a joint home loan along with your spouse in the
ratio of 50: 50, then both of you can claim these benefits separately.
So the combined limit will be Rs 3 lakh under Section 80C and 4 lakh
under Section 24. This can reduce your overall cost of loan for the
family considerably."
Bajaj adds that total deduction will be Rs 7
lakh and if both spouses are in the highest tax slab, they will get a
tax benefit of Rs 210000- which is just double compared to an individual
home loan, although this provision .
