Purchasing a home is a significant financial decision for every individual, especially with a substantial loan amount. In that respect, joint home loans often prove to be favourable for many borrowers. While a co-applicant is not mandatory for this type of credit, availing a joint home loan has various advantages.
Benefits of a joint home loan
- Improved eligibility criteria
The eligibility requirements of applicants willing to avail a home loan jointly are usually more relaxed, because it is sanctioned on the aggregate income of the co-applicants. For instance, if a single applicant’s take-home salary is Rs.1 lakh, then such loan amount will be offered where the EMI would be around Rs.40,000 (40% of monthly salary). However, if the combined income of co-applicants becomes Rs.2 lakh, the sanctioned home loan amount will be higher.
It is one of the major aspects of why you should consider owning a property with your spouse or any other suitable co-applicant.
- Concessional interest rates
If one of the co-applicants is a woman, concessional home loan rates will apply. The concession granted is usually up to 5 basis points less than the regular rate of interest. However, in certain cases, the female co-applicant will also have to be the co-owner of the property to avail the concessional rate of interest.
- Tax benefits
Joint home loan tax benefits are higher and can be availed both on the repayment of principal and interest under Section 80C and 24b of the Income Tax Act, 1961. Up to Rs.1.5 lakh can be claimed in a given financial year on the repaid principal. On repayment of interest, Rs.2 lakh can be claimed in a given financial year in case of self-occupied property. If a joint home loan has been availed, both co-borrowers can claim the deductions separately.
In other words, co-applicants can avail a total of Rs.3 lakh as tax exemption for principal repayment and a total of Rs.4 lakh for interest repayment. These tax savings will add up to an aggregate of Rs.7 lakh.
However, they will also have to be co-owners. Without such ownership, tax exemptions cannot be availed, even if a party contributes to the repayment of EMI.
- Lower stamp duty for female borrower
Stamp duty charges come down when property is registered in a woman’s name, and she can benefit from taking a home loan whether she is a joint owner or sole owner. It will effectively reduce the charges of stamp duty. Even though the duty varies from one state to another, in most cases the stamp duty is reduced by 1%-2% for woman sole owner or co-owner of home.
It should be kept in mind that registration fee, stamp duty and other expenses can be directly claimed as deduction under Section 80C of the Income Tax Act, 1961 to a maximum limit of Rs.1.5 lakh in a given financial year.
Who is eligible to be a co-applicant for a joint home loan?
The co-borrowers in a joint home loan may include –
- Unmarried daughter and mother
- Unmarried daughter and father
- Son and father
- Married couple
What are the documents required for a joint home loan?
The primary documents that have to be submitted for a joint home loan includes –
- Identity proof
- Address proof
- Income proof
- Proof of property co-ownership
- Banks statement of applicants
- Income Tax Return
- Certificate from society or builder
Fulfilling the eligibility requirements and submitting all the documents necessary simplifies the application process significantly. Moreover, leading financial institutions also extend pre-approved offers to existing customers, which makes the application process streamlined and quick. Mostly, such offers include various financial products, including home loans and loans against property. Check your pre-approved offer online by providing few basic details such as name and contact number.
When applying, individuals must make sure to keep the documents handy for a hassle-free processing. Also, it is advisable to apply online, as it makes choosing the suitable loan amount after required comparison convenient and simplifies the application process.