A joint home loan involves two or more applicants availing housing credit and distributes the financial liability of repayment. As more income is aggregated, the approved loan amount is also likely to be higher than a single applicant availing a credit.
Who are eligible to be a co-applicant for a home loan?
Immediate family members are eligible to be a co-applicant for a home loan. Both the applicants should have an independent source of income, and they will be considered as co-owners of the home.
Parents and children, spouses and siblings can be co-applicants in a home loan.
Benefits of availing a joint home loan
- Higher loan amount eligibility
Housing Finance Companies are likely to offer a larger loan amount when the income of both co-applicants is taken into consideration. The applicants can use an eligibility calculator to determine whether they are eligible for a particular loan amount. Employment status, age, and existing debt obligations are among the various factors that affect eligibility.
- The lower interest rate for women co-applicant
Many lenders provide a lower interest rate if you opt for a joint home loan with mother or any woman. The interest rates are likely to be lowered to up to 5 basis points as opposed to regular home loan interest. However, the woman co-applicant will have to be the joint owner of the home.
What are the tax exemptions applicable on a joint home loan?
Tax benefit on a joint home loan is higher as the benefits are availed by co-applicants separately. Under the Income Tax Act, 1961, joint homeowners can avail tax exemptions under Section 24(b) of the Income Tax Act for the interest paid and Section 80(C) for principal repayment.
The amount that is paid as principal repayment of the is eligible for tax exemptions under Section 80C. Up to Rs.1,50,000 is the maximum tax exemption that is allowed under the said provision. The year of payment is not relevant for calculation. However, the benefit may be availed only after the construction is finished, and the completion certificate has been issued. Exemptions cannot be claimed under Section 80C in principal repayment for all those years the property was under construction. It is likely that one is a co-borrower as well as joint owner of the property but not servicing the loan. In such instances, tax benefits on a cannot be claimed.
If the couple availing the home loan retain joint ownership of the property, under Section 25 of the Income Tax Act, 1961, each party are taxed as a separate entity, enabling them to claim tax exemptions separately. It invariably leads to higher quantum of exemption claimed by the borrowers.
However, such benefit can only be availed by the couple if they should not only be co-borrower of the but also the joint owner of the property. Unless this basic parameter is satisfied, tax benefits cannot be claimed on the home loan.
While joint has a number of benefits, it is in the best interest of the applicants to ensure certain safeguards to mitigate unanticipated issues during repayment. It is also important for the co-applicants to sign an agreement mentioning the exact loan liability of each, and the same should also be notarised.