Applying for a home loan is a long-term financial investment, so it becomes essential to make sure that the lender offers a good deal. Now, a lot of borrowers prefer to apply for home loan plans with a co-applicant. Taking a joint home loan changes things for the lender as well as the borrower. From a borrower’s perspective, applying for a joint home loan means better repayment capacity, with two borrowers earning active incomes. This is also great for the lender, reducing their risk of giving the loan. As a result, the lender can offer better terms on the home loan.
Now, if you are thinking about applying for a home loan with your spouse, go through a list of pros and cons before speaking to a lender:
Pros of applying for a joint home loan
1. Lenders can offer a higher loan amount
With a joint home loan, co-borrowers improve their home loan eligibility by pooling their incomes together, thereby increasing their loan affordability. With joint home loans, lenders can offer a higher loan amount.
2. Women co-borrowers can enjoy lower home loan interest rates
Most financial institutions offer home loans with lower interest rates to female borrowers. This still applies to a joint home loan with a woman being a co-borrower. This lower interest rate can be very helpful in bringing down the total cost of the loan as well as easing EMI payments.
3. Co-borrowers can take full advantage of the tax benefits available
A borrower can get tax deductions up to Rs. 1.5 lakh on the principal amount (Section 80C, Income Tax Act) and up to Rs. 2 lakh on the home loan interest payments (Section 24, Income Tax Act). Since each co-borrower can individually get tax deductions, they are saving double the amount through these tax benefits.
Cons of applying for a joint home loan
1. The unfortunate demise of a spouse
If a spouse passes away, the burden of clearing the home loan’s monthly installments will fall onto the surviving partner.
2. If the couple decides to part ways
If a couple chooses to part ways in the future and one of the co-borrowers opts out of repaying the loan, the responsibility to pay the loan will then fall on the other co-borrower. This could create repayment problems, which could then lead to legal hassles for both the co-borrowers.
3. Documentation process might take longer
Since a joint home loan involves two co-borrowers, the verification process of the documents for both individuals might get delayed. However, this problem can easily be solved. Check with the lender about the exact documents required for a home loan before applying for it. This way, the documentation process can be completed without any hassles.
Ultimately, it is up to the couple to decide whether to go for the joint home loan. It is advisable to make use of a home loan EMI calculator before applying for the loan to understand whether the monthly installments of the loan are suitable for your budget.