Things to know about being a co-applicant for a Home Loan

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If you are working toward realising your dream of owning a home, with the help of a Home Loan, there are quite a few boxes to tick. With factors like income and employment being called into question for loan approvals, there is no harm in doing all you can to strengthen your case. One such aspect, that can be used to tip the scales in your favor, is applying for a home loan with a co-applicant.

Facts that revolve around Home Loan co-applicants

Co-applicants have access to their fair share of pros and cons. Some of these are:

Pro: It enhances loan eligibility

When you apply for a Home Loan with someone else, you tell the lender that you have a higher combined income, as opposed to just yours. With a combined income, a Home Loan EMI would be easier to pay off, thus reassuring financiers of your ability to repay the loan.

Con: Separation

If you have a falling out with your co-applicant, problems are almost sure to arise. In the events of death, unemployment, or relocation of one co-applicant, the Home Loan requirements will have to be seen to by the other.

Pro: Tax exemption

If the co-applicants belong to the same family, the tax exemptions from the principal and interest amounts would go a long way in the savings column of the family budget. The bank-issued statement, and its duplicate, detailing the loan and repayment can be provided by the co-applicants for tax exemptions.

Con: Taxes on a second house

According to Income Tax regulations, if a person has more than one house, then one will be treated as self-occupied property and the other(s) will be considered rented out. As a result of that, you will need to pay taxes for the rent earned.


Pro/Con: Repayment

If you plan well, and consider each Home Loan EMI as a stable monthly expense, there is no reason you would default on a payment. This stability would increase your credit score, reflecting well on your ability to repay loans.

That being said, if either co-applicant defaults on one payment of the Home Loan, that would show up on both credit scores. As the undertaking is in the name of both applicants, both will have to bear the brunt of it.

Who can apply as co-applicants

There are certain laws applicable to co-applying for a loan. The teaming of co-applicants can be:

  • Spouses
  • Siblings
  • Parent and Son/Daughter

Before you sign off on being a co-applicant for a Home Loan, make sure you know all that it entails. The decision should ideally add to your assets without financially straining you. Once you have learned all you can, and are confident in your decision, get your Home Loan with your co-applicant.'

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