Most people dream of owning a house. Remember the pride and excitement you felt as a child after building a sand castle? However, life does not remain simple as you age. The rising cost of property can dampen your spirits. Have you thought about taking a joint home loan?
Here is why you should:
Joint eligibility
Two is better than one. Lenders sanction a loan based on your capacity to repay. In the case of co-ownership, you are more likely to pass the eligibility test. Suppose your single income does not make you eligible for a home loan. You could then apply jointly with your father, mother, brother, or spouse. In that case, the lender would assess your combined income. This would make you eligible for the loan. Having a co-applicant also allows you to borrow a higher amount because of the double income.
Joint liability
Share the load. It is easier to repay a loan if someone else is equally responsible for the task. Suppose you took a home loan along with your brother. You will then be responsible for paying only your share of the EMI. You and your brother could even buy loan insurance. If the other applicant fails to pay, this cover would take care of the Loan EMIs. You would not have to pay the outstanding loan then.
Joint tax benefit
Share the benefits. You and the co-borrower can share the tax benefits if you co-own the property. Under Section 80C, each co-owner enjoys an exemption of up to Rs 1.5 lakh on the repayment of the principal home loan amount. Section 24 allows a further exemption of up to Rs 2 lakh on the interest paid on the loan. These tax benefits are calculated in proportion to the amount you borrowed. Suppose you borrowed X% of the loan and your brother the remaining Y%. You can claim tax benefits on X% of loan repayment and the interest. Two applicants can, in fact, claim higher benefits than what a single applicant can. This is because the maximum tax benefit under Section 24 goes up to Rs 3 lakh on a combined basis.
Extra benefits
The more the merrier. Up to six persons can apply for a joint home loan. The liability and tax benefits are divided proportionately. Some states charge a lower property registration fee if one of the applicants is a woman. Spouses earn an added advantage when they co-own a loan. Suppose you took a joint loan with your spouse who earns less than you. You could make the higher contribution to the home loan to enjoy higher tax benefits. The term of the loan is likely to be higher, too, if spouses take a joint home loan. This is subject to the retirement of the older applicant. In comparison, if the co-applicants are parents and children, the maximum term is 10 years.
Bottom line
A joint home loan is easier to repay and beneficial in several other ways. However, co-applicants need to understand their individual liabilities, responsibilities and benefits. Only then should they agree to sign on the dotted line.
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