Applying for a home loan with a co-applicant – the preferred combinations

Applying for a home loan with a co-applicant – the preferred combinations 

A home loan is perhaps the biggest debt you can take. It is a high-value loan that lasts for up-to two decades in which one has to pay a huge chuck of their income each month, in the form of an EMI. Moreover, lenders need to consider multiple factors associated with this type of loan before they actually approve it. As such, it may not be a wise decision to take out a home loan singlehandedly. After all, it can get quite difficult to meet all the criteria set by lenders – be it eligibility, income, tenure or loan amount. However, there is a simple solution to can help applicants opt for a home loan, without adding all the pressure of managing it single-handedly – adding a co-applicant in home loan application.

Who is a co-applicant?

As the term suggests, a co-applicant is a person who is named in a home loan application along with the main applicant referred to as the borrower. While there is no legal mandate that one should have a co-applicant while applying for a home loan, it can certainly improve your chances of getting a home loan application approved. In case you apply for a home loan with a co-applicant, the lender considers the incomes of both applicants. Moreover, when you apply with a co-applicant, you get access to a bigger loan amount since the incomes of both applicants are clubbed. However, there are certain terms and conditions that borrowers need to be aware of while applying for a home loan with a co-applicant.

Who can be co applicant in home loan?

As mentioned above, a co-applicant is defined as the individual who shares equal responsibility in repaying a home loan. Most lenders mandate that the co-applicant be an immediate member of the family or a blood relative. That said, one must not confuse the term co-applicant with co-owner as a co-applicant does not necessarily have to share ownership of the property. However, he/she is held accountable for any issues pertaining to the loan. Typically, lenders allow the below mentioned combinations when a home loan is taken with a co-applicant.

Husband and Wife: This is the most preferred and acceptable combination. Both parties can own the property jointly and the incomes of both are considered during eligibility, thus increasing the chances of loan approval. Also, couples can split repayment as convenient to them and also benefit from tax deductions.

Father and Son/s: Father and son is an acceptable combination only in case the son is the only son in the family. In this combination, the lender considers the incomes of both parties while the names of both appear in the property document as legal owners. Either party may be named as the principal owner in co-borrower home loan. In case a family has more than one son and they wish to apply for this combination, then the father cannot be named as the principal owner. This is attributed to issues related to inheritance in the event of the father’s demise. In such a scenario, while the father may be named as the co-applicant, he may not necessarily be considered a co-owner and his income may also not be considered during eligibility check.

Father and unmarried daughter or Mother and unmarried daughter: In case the home loan co-applicants are a father/mother and unmarried daughter, then the property has to be in the daughter’s name mandatorily. The reason for this is to avoid legal disputes in the event of the daughter’s marriage. Also, the father’s/mother’s income is not taken into consideration in this combination.

Brothers: Two brothers can be listed as co-applicants in home loan only if the share the same residential address at the time of applying for the loan, while also intending to continue living together in the new property they are purchasing on loan. Lenders may require the brothers to be co-owners and not just co-applicants in this case.

Unacceptable combinations

Now that we know who can be co applicant in home loan let’s also take a look at unacceptable combinations for this type of loan.

• 2 sisters
• Brother and sister
• Father and married daughter
• Mother and married daughter
• Couples in a live-in relationship
• Friends
• Cousins

Final thoughts: Having a co-applicant in home loan, can take the pressure off of the entire repayment responsibility and prove to be a great source of relief. You also get several advantages including a better loan approval rate, increased loan amount eligibility and tax benefits for both parties.  If, at any point during the loan tenure, you decide that you wish to change your co-applicant in home loan, you can do so. There are provisions in place for the same. You can get in touch with your lender, ask for a novation and follow the guidelines as required by the lender.