Joint home loans are the best way to get your home loan application approved. Banks and NBFCs insist on taking a joint loan to shield mortgage risk and lure customers by providing concessional rates to women borrowers. Borrowers also get lured when they can avail higher loan amount and lower interest rate on their loans. But before submitting a joint loan application, you must always evaluate its pros and cons and then decide:
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When you apply for the home loan along with your spouse then it increases your loan eligibility. Since it is a long term loan borrowers are keen to get the best interest rates. Thus, when you apply together then you have more chance of getting you to loan approved owing to the fulfillment of various eligibility criteria as set by the lender. A joint loan application means you have a better income, lower debt to income ratio and a stronger credit score. Thus when you apply with a worthy co-applicant you have you can avail better terms on your loan as well as the lower interest rate.
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As we know, the home loan comes with some of the best tax benefits. The tax benefits are available under section 80C and 24B where the borrower gets tax deduction on both interest and principal repayment. Thus you can double your tax benefit on home loan if the co-owner of your house is also the co-applicant of home loan.
When you and your spouse apply for a home loan then both are eligible to get tax deductions under section 80Cand 24B thus reducing overall tax liability. Thus a single home loan allows you and your spouse to avail tax benefits and it is especially helpful if both the partners are professionals.
See Also: When To Switch Home Loan?
Most of the public sector banks offer concessional rates to woman borrowers of home loan. These rates are usually around 5 bps lower than the standard home loans rates provided by the lender. The benefit is provided to woman borrowers which mean the co-applicant must be the sole or joint owner of the property and also the primary or co-applicant of the loan. For example, SBI “Her Ghar” scheme comes with such a benefit.
Most lenders usually offer such a benefit if the co-applicant is the owner or co-owner of the property or if her CIBIL score and income are considered while assessing the loan eligibility.
While it is true that with a joint loan you can avail higher loans amount, the applicants do not have to make equal contributions towards its repayment. The co-applicants can decide how much each of them wants to contribute towards the principal and interest repayment.
Sometimes a joint home loan is not the best option for you. Here are some of the downsides of joint home loan you must be aware of:
You must not apply for a home loan with a person who doesn’t have a good repayment record and has a low credit score. A joint home loan gives flexibility to both the applicants to decide on the repayment and provides an affordable interest rate you must consider its downside as well. In case any one of the applicants misses or defaults Loan EMIs then the other has to bear the brunt by taking the entire loan burden on self. Else the credit history of both the applicants will be equally affected.
As there is more than one applicant to a single loan, the time taken to process the application is more. Banks usually take more time to complete the verification process for joint loans. Due to the extensive verification process, the processing of joint home loans takes time.
The lenders ensure that both the applicants have provided authentic documents, then they conduct CIBIL verification and then devise loan rates based on the income and repayment capacity of both the applicants. Also, the entire process is cross-checked thus extending the timeline of loan sanctioning a little further.
In case the co-borrowers decide to get a divorce and one of the borrowers decides to move out of the loan then the entire repayment burden comes on the primary applicant. If the primary applicant defaults on payments then the bank can move to court against both the applicants or confiscate the property.
In case of the death of one of the borrowers, the surviving borrower must take care of the loan repayment. Thus it is better to avail separate terms plans while availing a joint home loan to decrease the financial burden in case of demise of one applicant.
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