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.
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.