Is it Beneficial to apply for a Home Loan with Co-Applicant?

Is it Beneficial to apply for a Home Loan with Co-Applicant?

Home loans can be availed individually or jointly. Individual home loans are those where you independently apply for a home loan, and the lender judges your eligibility to approve your loan. Based on your eligibility parameters, the loan is sanctioned, and the funds are disbursed. Joint home loans, on the other hand, are those loans which are applied by two or more individuals jointly. If you apply for a home loan with your spouse, parents, children, etc. the loan would be called a joint home loan.

Under joint home loans, each applicant is called a co-applicant. The lender judges the eligibility qualifications of each co-applicant before sanctioning the loan. The loan is then approved depending on the eligibility qualifications of all applicants of the loan.

Are joint home loans beneficial?

Yes, there are many benefits of availing a home loan with a co-applicant. These benefits include the following –

Better interest rates

As a co-applicant is added, his income is also added to the income of the other applicants. As such, the total income increases, which gives the application better financial credibility. As the disposable income increases, the lender offers a joint home loan at lower interest rates, a possibility which is absent in individual home loans.

Increased loan amount

The amount of loan sanctioned does not only depends on the cost of the property but also on your income. As stated earlier, when a co-applicant is added, the combined income increases, which allows the lender to offer a higher quantum of loan. So, if you need a higher amount of loan and a lower margin, applying with a co-applicant would be a good choice.

Good chance of availing the loan even with a low credit score

Home loans require a credit score of 700 and above. If your credit score is low, your home loan application would be rejected. Adding a co-applicant to your application which has a high credit score can save your application. The co-applicants high credit score would average out your lower one, and the lender would allow you a home loan.

Easy approval of the loan

Home loans, which are joint loans applied with co-applicants, are approved more quickly compared to home loans which are applied independently. So, for quick turnaround time on your home loan application, apply with a co-applicant.

Tax benefits

It is no mystery that home loans allow tax benefits. The principal amount of the loan which is repaid is allowed as a deduction under Section 80C. This deduction is available up to INR 1.5 lakhs. Besides this, the interest that is paid on the home loan is also allowed as a deduction under Section 24. This deduction is allowed up to INR 2 lakhs. Moreover, a new section has been introduced in the Union Budget 2019 which is Section 80EEA which allows an additional deduction of up to INR 1.5 lakhs on home loan interest repayments subject to certain terms and conditions. When you apply for a joint home loan, all applicants of the loan can claim these deductions and reduce their tax liabilities.

Applying with a co-applicant is, therefore, a beneficial move, and if you have an earning member who can act as a co-applicant, apply for joint home loans.

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