Who Can Be A Co-Applicant In A Home Loan?

The desire to buy a home is a major life goal in India. A lot of people start saving early to fulfil their ambition of owning a home. Financial institutions assist in this goal by providing home loans at competitive interest rates to determined individuals.

You can apply for a home loan as a co-applicant, co-signer, co-borrower, or co-owner. When two people apply for a home loan together and agree to split the Equated Monthly Instalments (EMIs) and other obligations, they are considered co-applicants. As a co-applicant, you must also understand the associated financial and legal responsibilities. Let’s assist you in understanding the co-applicant in home loan through this article.

Understanding Co-Applicant Meaning

A co-applicant is a borrower who applies for a home loan with you along with home loans. They increase your eligibility for loans and divide the burden of loan repayment, which may increase the likelihood that your loan will be approved. Co-applicants are helpful support in obtaining your ideal house.

It's crucial to choose the appropriate co-applicants for a home loan. Spouses are the most common co-applicant combination, using both of their incomes to qualify. A father-son or brother-brother option is an additional choice; however, acceptance relies upon the bank's policies. To increase the variety of co-applicant options, an unmarried daughter may co-apply with one or both parents. It is easier to apply for a home loan when you are aware of these dynamics.

Advantages of Having a Co-Applicant in a Home Loan

Learn more about the advantages of having a co-applicant to help your home loan journey go more smoothly. It provides several benefits:

• The chance of a loan being approved rises when both co-applicants have steady income streams and strong credit scores.
• Co-applicants with solid credit scores and stable finances might benefit from competitive home loan interest rates offered by financial organisations.
• The co-applicants share joint tax benefits because they are co-owners of the property.
• Both applicants' eligibility is increased when they co-apply for a home loan.

Disadvantages of Having a Co-Applicant in a Home Loan

Along with advantages, co-applicants in a home loan carry some drawbacks too. This includes:

• If a loan goes unpaid, the personal assets of co-applicants are at risk. Banks can legally claim co-applicant's properties to recover their money.
• When someone writes their will, they might divide property differently than loan responsibilities. This often leaves co-applicants paying for property they don't fully own.
• Problems appear when property ownership doesn't match loan payment duties. Many co-applicants find themselves unfairly burdened with payments despite limited ownership.
• Co-applicant’s credit score suffers if the main borrower misses payments. This can make it harder to get loans or credit cards in the future.
• Being a co-applicant limits how much you can borrow for other needs. This might affect your plans for future borrowings.

Responsibilities of a Co-Applicant in a Home Loan

The major responsibilities of a co-applicant are as follows.

1. Sharing financial data
2. Settling the debt in the case of default
3. Keeping your credit score high

The principal borrower and the co-applicant in a home loan share repayment obligations. They have equal responsibility for repaying the loan balance. To improve their eligibility for a home loan, the co-applicant must further give the financial institution their financial details.

The co-applicant is in charge of repaying the remaining balance in case the principal borrower defaults on the loan. As a result, the co-applicant is required to keep up a high credit score and make sure the loan is repaid on time.

How Can Co-Applicant Claim Tax Benefit on Home Loan?

To avail tax benefits in a joint home loan are as follows.

1. You Must Be a Co-Owner

To be eligible for tax benefits on a jointly owned home loan, you must be the property owner. Loans are often taken out jointly, even though the borrower is not the legal owner, according to the property papers. In this case, you might not be able to collect tax benefits.

2. You Must Apply for the Loan as a Co-Borrower

Applicants who repay the loan jointly will receive tax benefits.

3. The Construction of the Property Must Be Completed

Tax benefits on a residential property can only be claimed starting from the first day of the fiscal year following the completion of the property. Tax incentives do not apply to a property that is still under development. On the other hand, all costs paid before to completion are reimbursed in equal installments starting the year the building is finished.

Home Loan Co-Applicant Tax Benefit

The tax benefits of home loan co-applicants are as follows.

• The ownership portion of the loan determines the fraction of the tax deduction.
• The highest tax refund available to each candidate through the house loan is Rs. 1.50 lakh per person, with around Rs. 2 lakhs being repaid as principal.
• The requirement that the loan be taken out in the names of two people is the most important requirement for tax exemption and joint home loans.
• The documentation for the co-owners should indicate each person's proportionate share of ownership in the joint loan.

Is Co-Applicant Mandatory For Home Loan?

Although it is not legally required, having a co-applicant has advantages when applying for a home loan in India. Initially, because there are two parties sharing liability, it helps reassure lenders of timely loan payback. A co-applicant increases your eligibility for a house loan as well.

Conclusion

The largest financial risk is applying for a home loan. When selecting a co-applicant or co-signer, you must proceed with caution if you are the primary borrower. You can proceed with the home loan after you've decided which choice is ideal for you.

FAQs on Co-Applicant in a Home Loan

1. Can a co-applicant apply for another Home Loan?

If a co-applicant fulfils the eligibility requirements and can submit the necessary supporting papers, they may apply for a second home loan. It is crucial to remember that having several loans could harm the co-applicant's creditworthiness and stability.

2. Can a co-applicant be removed?

It is occasionally possible to remove a co-applicant from a home loan, although each bank has a different procedure.

3. What are the rights of a co-applicant in a Home Loan?

Repayment of a home loan is equally a responsibility of each co-applicant. As per the terms of the loan arrangement, they are entitled to view loan data, keep track of repayments, and take advantage of tax benefits.

4. What is a co-applicant's role in a home loan?

A co-applicant is a person who applies for a home loan with you as a joint borrower of the loan amount. Your eligibility for a home loan may be increased if you have a co-applicant.

5. Does a co-applicant have the right to tax benefits?

Co-applicants on a home loan are eligible to receive tax benefits, yes.