If you are a salaried individual trying to make both ends meet, having your own house or being the owner of a small property is perhaps a cherished dream. You compare home loans periodically, but that dream for you seems out of reach, even if you are stretching yourself to save up for the down payment of your home someday. This is not because of home Loan interest rates but the fact most lenders have rather stringent eligibility criteria for aspiring borrowers. If you have taken a step back owing to such rules, you can enhance your eligibility by applying for a joint home loan with your spouse. Here’s why:
What lenders want
Before we delve into why a joint home loan Application makes sense, let us tell you what are the expectations of a typical lender from a home loan borrower. There are several types of home loans in India. The repayment capability of a borrower and home loan interest rates are assessed by taking into consideration various factors such as income, assets, liabilities and job stability. An ideal borrower should be within 25-40 years of age and should be employed with a large or recognised public or private sector company.
The lender will also look at the current assets and liabilities of the aspiring borrower and expect that including the EMI for the loan that he has applied for his liabilities are not shooting up beyond 45-50% of his monthly income. Lastly, it will take into consideration his credit score, which is barometer for his past credit service track record. The application of any individual with a score of below 750 (out of 900) is likely to be rejected. past.
How to enhance loan eligibility
Often, a young individual is unable to qualify under the above-mentioned criteria If you think that the above criteria too difficult to meet, an easy way to access a home loan is by making an application jointly with a family member. By making an application with a co-applicant, your eligibility can increase manifold and may even qualify you for cheaper home loan rates. Joint loans can be co-applied for with blood relatives (parents or siblings) or your spouse.
The impact on repayment tenure
If you choose to apply for a home loan with your spouse, the tenure of your loan tenure can be stretched to a maximum of 20 years. This is however subject to the age of the older among the applicants. On the other hand, if you wish to co-apply with a parent or your siblings, the tenure of the loan cannot exceed 10 years. Also in case a working parent is a co-applicant on your loan, the repayment tenure may be restricted to the number of years he or she has left in service.
Greater tax benefit
The most obvious benefit of making a joint home Loan Application is the ability to reduce your taxable income. By making an application for a joint home loan for a self-occupied property, you and your co-applicant can individually claim tax benefits on the repayment of the principal amount under Section 80C as well on interest payment under Section 24 of the Income Tax Act. With a tax deduction of up to ₹1.5 lakhs each under Section 80 C of the Income Tax Act and ₹ 2 lakhs under Section 24, you could both reap tax deduction benefits of up to ₹ 7 lakhs annually, thus enhancing tax benefits.
How to resolve disputes
Situations and circumstances in life do not always remain constant. Today you may be checking out the best home loans in India and making a joint application with your spouse, but tomorrow you may not see eye to eye. Under such circumstances, the lenders do not want to take any chances. It is thus required by law for the co-borrowers to specify the liability of each borrower and draft a legal document that clearly states the same.
This document should be in possession of the lender. In case of any dispute, an untimely death or insolvency, the lender will then proceed with the recovery procedure in accordance to the liability of each borrower as specified in the legal tender. If your co-borrower is your spouse who shares equal responsibility of the home loan, it is advisable to opt for a life insurance cover that ensures that there is no financial burden on account of the repayment of the home loan in case of your untimely death
Now that you are aware of the benefits of taking a joint home loan, here is a ready reckoner to help you prepare for the application of one:
- Check individual credit score – Both borrowers should have a CIBIL score of more than 750 to ensure that your application goes through. Try to improve your CIBIL score before making a home loan application.
- Avoid accessing any other credit line six months prior to making a home loan application– This will ensure that your CIBIL score does not get negatively impacted before making a home loan application.
- Documentation– Look at the website of the lender and get all the basic documents like age, income and address proof in order before making the application. All property related documents should also be arranged for prior to making an application.
- Draw up liability terms objectively– Although it may not be relevant at the time of making a joint application, it is impossible to predict the future. It is therefore important for you to have a frank discussion with your co-applicant and decide upon the liability of each borrower in a legal document to be submitted to the lender.
- Opt for adequate life cover – Once the loan is disbursed, do not delay the process of taking individual insurance cover that will protect your spouse from falling prey to your share financial liabilities.
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