Is it wrong to Take a Joint Home Loan?

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Buying a home among the biggest investments that we make in a lifetime, and we all want to live in our dream home. Although savings aren’t enough to make such a huge investment, it becomes mandatory to avail of a loan. Since the amount required is enormous, you need a considerable amount of loan to meet this financial requirement. Joint home loans make it possible since the repaying capacity of the co-applicant is also taken into consideration. This enables you to get a larger amount to buy your dream home. 

You should also ensure that the co-applicant you choose has a good credit score and meets the eligibility criteria since it will also affect the combined credit score that is looked upon while granting the loan. In case the overall credit score is impacted, it might get challenging to get a home loan, as it will affect your creditworthiness. 

To answer your question, no, it is not wrong to take a joint home loan, but you must consider some factors while deciding along with several pros and cons of joint loans. 

What is a Joint Home Loan?

A joint home loan is what you apply for and take with another person, either your spouse, sibling or parents, as it has numerous benefits. Joint home loans are a preferred choice these days among the people who are planning on buying a new home since it eases the financial obligations of an individual. 

Who is eligible to be the co-applicant?

  • Spouse
  • Unmarried daughter and father
  • Son and Father
  • Mother and unmarried daughter
  • Brothers

Who is not eligible to be a co-applicant?

  • Brother-sister
  • Cousins
  • Friends
  • Sisters
  • Unmarried partners

Factors to consider while taking a joint home loan:

  • The co-applicant doesn’t need to be the co-owner, but it is a must that the co-owner has to be the co-applicant of the joint home loan.
  • The liability to repay the loan will also be on the co-applicant, and if anyone defaults the payment, the credit score of all the applicants will be affected. 
  • It is viable that the co-applicant takes life insurance, which will reduce the financial burden in case of any applicant’s unfortunate death. 

Pros of A Joint Home Loan

  • Loan Eligibility: 

With the additional income of the co-applicant, there are higher chances of getting a more considerable amount as the repaying capacity and your income is taken into consideration by the lenders. The co-applicants income increases your chances of eligibility. 

  • Bigger Home: 

Since the chances of your eligibility increase with a co-applicant, you will be able to get a more massive amount and hence the increased possibilities of buying a dream home. 

  • Responsibility: 

With a co-applicant, the responsibility of paying back the loan amount is shared and divided, and hence, it puts less burden on you. It reduces financial obligations, decreasing the chances of defaulting the payment, which might affect your creditworthiness in the future. You can also use the home loan EMI calculator to know your finances and keep your cash flows in check. 

  • Tax Benefits: 

You are eligible for a tax rebate of upto Rs. 1.5 lakhs each when you pay the principal amount of the home loan and Rs 2 lakhs each under section 80C and Section 24, respectively, of the Income Tax Act. These tax benefits can be claimed once the construction has been completed and not before that.

  • Ownership Transfer:

It becomes extremely convenient to transfer ownership to the other applicant because he/she is also the co-owner.

Cons of a Joint Home Loan:

  • Credit Score:

Suppose your co-applicant is unable to or refuses to pay the monthly instalments for some reason. In that case, your credit score and credit history will be affected, creating challenges in availing of a loan in the future. 

  • Legal Problems: 

In the case of divorces, etc., there can be legal problems if the home loan has to be repaid. Suppose the property is in the name of one of the co-borrowers. In that case, the ownership will lie with them even after the loan has been repaid irrespective of whether the other co-borrower has also paid his /her share of monthly instalments. 

Therefore, these are some factors you should consider before deciding on taking a joint loan. It is recommended that you weigh the pros and cons of joint home loans and then go ahead. You should see what suits you best according to your requirements.