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Benefits of Joint Home Loan

Benefits of Joint Home Loan
 

5 major benefits of opting for a joint home loan

Each one of us dreams of having a home of our own. But skyrocketing real estate prices mean that the only way, especially for the middle class, to achieve this dream is through a home loan. Taking a home loan is a major decision involving huge sums of money, which can mean repayments for many years. But there’s a simple way of reducing the stress of repaying the loan – you can apply for a joint home loan with another co-applicant. Here are 5 major joint home loan benefits.

  1. It improves your loan eligibility
    The loan amount you are eligible for is determined on the basis of many parameters – your age, occupation, credit repayment behaviour and income, for instance. Of these, you annual income is one of the most crucial criteria which lenders use to calculate the amount you are eligible for. Now, if you apply for a home loan as a sole applicant, the lender only considers your income, based on which the loan amount is determined. But when you apply for a home loan with a co-applicant, the joint home loan eligibility criteria are applicable. This means the lender considers the annual incomes of both you and your co-applicant. So when you apply jointly, you stand the chance of receiving a higher loan amount.
  2. You can purchase a bigger home in your preferred locality
    When your joint home loan eligibility increases, your chance of purchasing your dream home also increases. You get the benefit of increasing your loan budget and purchasing a house in a location that you prefer, without having to compromise on either the size of the house, or the locality. With a joint borrower, you can think of purchasing a 2 or 3 BHK house, or a villa or bungalow, if the budget permits -- that too, in a centrally located area, with all the necessary amenities in the vicinity.
  3. It helps divide the burden of repaying the loan
    There’s no doubt that the burden of repaying a home loan is rather huge. If you apply for the loan single-handedly, you may have to spend every rupee saved on repaying the loan, for years on end. But a joint home loan benefits you in that you can easily share the burden of the loan with your co-applicant. You can come up with a repayment schedule in which the loan is repaid by both applicants equally, and you can even repay the loan over a shorter tenure. Moreover, both applicants can use income from variable pay sources like incentives and annual bonuses to pay additional EMIs and even prepay the loan before the stipulated tenure.  
  4. Choosing an appropriate co-applicant can help you get a reduced interest rate
    In case you are applying for a joint home loan, ensure that your co-applicant is a female borrower – particularly your spouse. Applying for the loan with your wife -- who can be an entrepreneur, a freelancer or a salaried individual -- can prove to be extremely beneficial. When you apply with a female borrower, you stand the chance of getting the loan at a lower interest rate. As per RBI regulations, female borrowers are eligible for interest rates that are half a percent lower. And although this seems like a very small percent, you must remember that home loans involve large sums, and the amount you can save with a half percent cut can be quite high in the long term.
  5. You can get maximum tax benefits
    Apart from the basic benefits mentioned above, joint home loan tax benefits are the most important. As per the income tax laws in India, you can get several tax exemptions on joint home loans, which can lead to huge savings. For instance, under Section 80C of the Income Tax Act, you can reduce your taxable income by Rs.150,000 per annum if you make investments in specified instruments. One of them is a home loan, for which you are eligible for a tax reduction. Now, when you apply for the loan with a co-applicant, you can reduce taxable income by Rs.150,000 individually, which means together you can reduce your taxable income by Rs.300,000 each year on a joint home loan. Moreover, the interest paid on the principal loan amount also classifies for tax exemption under Section 24B of the IT Act and you get annual tax exemptions of Rs.200,000 individually and Rs.400,000 together with your joint applicant. This amounts to a reduction of taxable income by Rs.700,000 between the two joint applicants.
    Final word: As is apparent, joint home loan benefits make applying for a home loan with someone else worth it. It also comes in handy during unforeseen life situations, especially loss of employment of one of the two applicants. The co-applicant can continue repaying the EMIs while the credit scores of both applicants can remain intact.

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