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Pros and Cons Of A Joint Home Loan

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It has become easier to be a homeowner today because of lower lending rates and incentives offered by builders. Despite these concessions, buying your own home is still a huge financial responsibility, and one you may find difficult to shoulder yourself. So, one option is to share the responsibility by taking a Joint Home Loan. Availing a Joint Home Loan makes financial sense for many reasons; but, like all financial decisions, you should take this one by weighing the pros and cons.

Pros and Cons Of A Joint Home Loan

Implications of Taking a Joint Home Loan

Not every individual is in a position to repay a Home Loan on their own. Paying off a Home Loan is a challenging endeavour and one that few can carry out alone. So, you can apply for a Home Loan jointly with your spouse, siblings, or parents as it lets you bid for a higher loan amount.

Responsibility of co-applicants

In every Joint Home Loan, there are two parties—a primary applicant and a co-applicant. The co-applicant’s income not only helps to supplement that of the borrower, but it also raises the credit limit he/she is eligible for. When you take a loan jointly, the lender assigns the responsibility of paying back the loan equally among all applicants. If the primary applicant defaults, the responsibility of full repayment falls on the co-applicant.  The credit history and scores of both applicants are affected too.

Now, take a look that the benefits a Joint Home Loan offers, along with the factors that you need to be mindful of.

Advantages of Taking a Joint Home Loan

  1. a) Avail a higher loan amount: Since your income is combined with that of your co-applicant, the total amount is taken into consideration when granting you a loan. As a result, you can be eligible for a higher loan amount.
  2. b) Affordable repayments: With the repayment of EMIs being shared between you and the co-applicant of the Joint Home Loan, the pressure to repay is reduced considerably.
  3. c) Tax exemption: This works best when you and your partner apply jointly for a Home Loan. Both applicants can claim tax benefits on both the principal as well as interest amount, up to Rs.1.5 lakh in the first instance and up to Rs.2 lakh against the interest as per provisions of the Income Tax Act. But most importantly, if the property is rented, both applicants can claim the entire interest amount as a deduction. The limit of Rs.2 lakh is not applicable here.

Also Read: 5 Tax Benefits You Must Know About Home Loan

Cons of taking a Joint Home Loan

  1. a) Issues with your co-applicant

If you apply for a Joint Home Loan along with a co-applicant, you must ensure that you choose a trustworthy person. If your co-applicant defaults or withdraws from the loan, you will land yourself in a financial crisis. Also, his/her defaults will also reflect as red flags on your credit score.

If your co-applicant loses his/her job, this can affect your cash flow and so, can hamper loan repayment. The same applies for if you and your spouse have taken a joint loan and are getting divorce. You can continue to share ownership of the house and share the EMI responsibility. But, if your spouse doesn’t want ownership of the house, you will have to talk to your lender and see if you can convert the joint loan to a single-borrower loan.

  1. b) Documentation delays

With more persons applying for the Home Loan, lending agencies may take longer time to process and sanction the loan as they have to verify a larger number of documents.

So, if you’re applying for a Home Loan, be sure to keep these pros and cons in mind to make the most of the borrowing experience.