Taking a Joint Home Loan with Your Sibling?

Introduction

A joint home loan can be availed along with a co-applicant to help increase the chances of loan eligibility. Additionally, a joint home loan also qualifies you for a higher loan amount and helps you share the financial burden with the co-applicant. 

Co-applying for a loan means jointly taking a loan in the name of two or more individuals. In the application, one person will be listed as the primary applicant and the other will be called a secondary applicant.

While technically you can take a joint home loan with your sibling, there are several factors to consider before doing so. Here are some of the important aspects that you should know before applying for a joint loan with your brother or sister.

What is a Joint Home Loan?

A joint home loan is a secured loan that can be availed with a co-borrower who shares equal financial responsibility of the loan. It allows you to enjoy concessional interest rates and also tax benefits. If you apply for a home loan along with a co-borrower, the co-borrower will be known as a co-applicant. 

Who can be co-applicants for a joint home loan? 

Before you apply for a joint home loan with your brother or sister, you need to be aware of who can be listed as co-applicants. 

  • Banks or lenders generally do not allow brother-sister pairs to be co-applicants in a joint home loan mainly owing to future complications regarding succession.
  • Leading banks mandate that a person can be co-applicant only if they are not minors and have a steady source of income. 
  • Banks also state that the relationships between the two applicants should be as per policy norms, which could be two brothers, husband-wife, mother-son or father-son. 

Who is Eligible for a Joint Home Loan?

If you are looking to apply for a joint home loan, here are some of the eligibility criteria you must meet:

  • You must be an Indian citizen above 18 years of age. 
  • You should have prior work experience of two years or more.
  • The minimum income requirement for the main applicant is Rs. 25,000 for most banks.
  • More than six people cannot apply for a joint home loan under a single loan application.
  • Banks usually specify the situations under which relatives can be co-applicants for a home loan. The relationships that are allowed to be co-applicants for a joint home loan are husband-wife, brother-brother, mother-son, and father-son.

What are the Benefits of taking a Joint Home Loan with your Sibling?

Taking a joint home loan with your sibling can provide the primary borrower with the benefit of a better home and also reduce the overall cost of the home resulting from larger tax benefits. Here are some of the noteworthy benefits of a joint home loan:

  • Higher loan amounts: Joint loans increase the loan amount eligibility since banks measure the eligibility of loan amount as a proportion of income. 
  • Tax relaxations: A joint home loan benefits the primary borrowers and the co-applicant as they can claim higher tax benefits on home loans. The tax relaxations for the principal amount and interest component can be maximum of Rs. 7 lakhs. As per sec 24 and sec 80C of the Income Tax Act, the borrower and co-applicant can avail tax benefits of a maximum of Rs. 1.50 Lakh on the principal amount and Rs. 2 Lakhs on the interest amount. However, the total interest rate relaxations may not exceed the amount of interest paid to the bank.
  • Reduces risk: As the accountability to repay the loan falls on both the primary borrower and co-applicant, there is comparatively less burden on the borrower.

 

What are the Disadvantages of taking a Joint Home Loan with your Sibling?

Some of the disadvantages of joint home loans that borrowers must be aware of are:

  • Delay in documentation – In some of the joint home loan cases, banks may take additional time to process the documents submitted by co-borrowers. Since the quantum of documentation is high, there are chances of delay in loan processing.
  • Death – In case of death of one of the co-applicants or siblings, the other individual has to temporarily take the additional burden of loan repayment till a workaround can be arranged. 
  • Impact of relationships – If there are any disputes between siblings during the loan tenure, it can have an impact on loan repayment, especially if one of the co-borrowers refuses to make a payment towards EMI. 

 

What is Joint Ownership?

Joint ownership of property is compulsory to get a joint home loan as the lenders get additional comfort from the earning capacity of the co-applicant and hence, are willing to lend more at low rates. A joint home loan improves a borrowers’ eligibility for getting a loan as he is better placed to meet the loan eligibility criterion of a bank. Further, a joint home loan allows a borrower to get a higher loan amount than what he is eligible for based on the income of a single applicant. Joint owners of property who are also joint co-applicants are eligible to claim tax benefits separately on their respective income sources.

What are the Documents needed for Home Loan with a Co-applicant?

The documents required in a joint home loan are similar to ‬home loan documents:

  • Duly Filled Loan Application Form
  • Recent Passport Size Photographs
  • Last ‬2 ‬years ITR
  • Proof of Identity – ‬PAN Card, ‬Voter’s ID Card, ‬Passport, ‬Driving Licence
  • Proof of Residence – ‬Rent agreement, ‬Leave and License, ‬Latest Utility Bills and Passport
  • Income Documents – ‬6 ‬months’ payslip, ‬2 ‬years Form ‬16, ‬latest ‬6 ‬months bank statement showing salary credit
  • Business proof for self-employed such as VAT/ ‬service tax registration, ‬incorporation details in case of companies, ‬business address proof, ‬profit and loss account and balance sheets certified by a qualified CA. Copy of partnership deed and proof of the existence of business along with the business profile
  • Property Documents ‬- ‬Past title chain, ‬Sales deed, ‬Conveyance deed, ‬Allotment letter, ‬Possession letter, ‬Latest property tax receipt, ‬Copy of approved plan for construction/ ‬extension

How to Apply for a Joint Home Loan?

You can apply for a joint home loan via two modes:

Online: By visiting the bank website or an online marketplace.

Offline: By visiting the bank branch or calling customer care.

Endnote

A joint loan taken with a sibling can prove beneficial for the primary borrower and the co-applicant. A loan borrower can avail of tax benefits, higher loan amounts, and also lower interest rates by applying for a home loan with a sibling.

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