Thu. Sep 24th, 2020

The concept of taking a home loan with a partner sounds interesting. You both can pay your shares of the EMIs, so there is no burden on one person. However, there are various other aspects to joint home loan than simply sharing EMIs. Here are a few pros and cons that you must know before applying for a home loan in joint name. 

 Pros

Greater Loan Amount

The very first benefit and one of the significant reasons why people apply for home loans jointly is the higher loan amount. As both partners’ income and financial statuses are analyzed, you become eligible for a more significant home loan. Let’s understand this with figures. If your salary is 1 lakh per month, you can apply for a certain amount of loan. But when you add a co-borrower, the total considered income is your 1 lakh plus whatever the other one earns. Higher salary means greater loan amount eligibility. 

Flexible Repayment

You don’t need to divide the EMI amounts equally between the partners. Usually, this repayment ratio depends on the ownership of the property. But you don’t need to settle for that, and you can adjust it according to your convenience. The person who earns less can contribute a lesser amount while the higher income person can pay the remaining amount. 

Tax Benefits

When a home loan is borrowed jointly, the co-borrowers get their individual tax rebate. You and your partner can claim the similar tax benefits separately according to your share on loan. For example, Section 80C of up to ₹1.5 lakh deduction on principal and Section 24b of up to ₹2 lakh deduction on interest will be applied to your individual incomes. This increases the total deduction on taxes, and you get more benefits. 

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Women Concession

If your co-borrower is your wife or sister, i.e., a woman, you may get some additional savings. A few states offer a concession on stamp duty if one of the house owners is a woman. So you can avail that as well. But you will first have to check with the authorities whether this benefit is available in your location or not. 

 Cons

Credit Score Deterioration

The perk of flexible repayment can turn into a con if any of the co-borrowers default on loan. In such a scenario, the credit report and score of both the borrowers will deteriorate as you both will come under defaulters. 

Delay In Documentation

Consider the joint home loan situation as two separate loans. The documents of both the borrowers are checked and analyzed individually. Therefore, you may experience a delay in the overall processing of the loan. 

Death Or Divorce

In case your co-borrower decides to move out of the home loan, you will have the entire responsibility of repaying it. There are no exceptions in this situation. Even if the other partner turns out to be a defaulter, you will have to face the legal actions as well. For the death scenario, you can try to compensate for the amount with the term plan funds that you may receive. But the other cases don’t have any solution. 

Conclusion

Now that you are aware of what you will be facing with a joint loan on your house, you can plan accordingly. Start your journey by searching for “how to check home loan eligibility.” You will be able to see how much amount you can borrow, jointly or individually. The further steps will depend on this factor only. 

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