A home loan application rejection not just results in disappointment but also makes you miss out on the chance of becoming a homeowner early in life. However, there are various ways to make sure that your application goes through. One of the ways is adding a co-applicant. Before you use this option to apply for a home loan, it is crucial for you to measure the pros and cons of availing a joint home loan.
Let’s first start with understanding who a co-applicant is:
A co-applicant is the one who participates in the home loan underwriting and approval process with you. They are usually considered as secondary to the principal applicant. On the viewpoint of loan’s rights, a co-applicant is not the same as a guarantor or co-signer.
A co-signer or guarantor helps a primary applicant to obtain favorable loan conditions. However, they are hardly granted any access to the submitted collateral, if any. As an outcome, they function just as a backup source for the primary applicant. However, when you apply for a loan along with a co-applicant, this is like 2 individuals requesting for a single credit option, sharing the liability of the loan.
You cannot add anyone to become your co-applicant for loan. Lenders have specified a certain category of individuals who are permitted to become co-applicants. These include:
- Brothers
- Father and son
- Husband and wife
When it is about other relationships, there are specific restrictions. A father and a minor or unmarried daughter cannot become a co-applicant for a home loan.
How adding a co-applicant in home loan can benefit you?
Enhances your home loan eligibility chances
If you are a home loan seeker with a low credit score, inadequate income etc., you may find it tough to get a home loan approval. Few of the major eligibility parameters set by lenders include a minimum income level, debt to income ratio, credit score etc.
- Availing a joint loan with a co-applicant having a good credit score and strong repayment capacity ameliorates your housing loan eligibility chances.
- You can also avail a higher loan amount on applying along with a co-applicant.
Additional tax benefits
Home loan tax benefits are available under Section 24b and Section 80 C of the IT Act.
- You can claim deduction on your home loan interest payment as per Section 24b. Maximum amount that you can claim as deduction is Rs 2 lakh per financial year.
- Home loan principal repayment is eligible for tax deduction as per Section 80C. Maximum amount allowed as deduction is Rs 1.50 lakh per financial year.
With a joint home loan, co-borrowers can also avail such tax benefits separately.
Lower home loan rate if a woman is added as a co-applicant
Many lenders provide a better home loan rate if a woman is a co-applicant. To get such rate concessions, women must either be a joint or sole home or property owner. Note that many lenders also check for women co-applicant’s income when assessing repayment capacity and loan eligibility.
Ending note
Ensure to consider all the points mentioned above to understand your housing loan eligibility chances if you are applying with a co-applicant. You can easily calculate your affordability, using the home loan eligibility calculator. Such calculators allow you to calculate your eligibility based on your inputted data. Based on the data, the calculator may provide you with different home loan offers, which you can compare and select as per your affordability and requirement.
