Tuesday, November 24, 2015
by
Indian Real Estate News
Buying a home is one of the biggest financial decisions that you need to consider carefully. One of the most important things before buying a house is to fi nd out whether you are eligible for the amount of loan you would require. Lenders usually consider the homebuyer's current liabilities, assets and income before forwarding a loan. Therefore, if your mortgage requirement is higher than what you are eligible for, you may increase your eligibility by considering a joint housing loan. Banks allow up to six applicants for a housing loan, depending on their individual credit profi les. Here is a detailed guide on the benefits of joint home loans.
WHO ALL CAN APPLY?
You can take joint home loan with your spouse, or include parents and siblings, subject to certain conditions. Married couples, or a parent and child, can take a joint loan. Some banks allow brothers to apply for a joint home loan provided they are both co-owners of the property. Banks insist that all co-owners of the house must be co-borrowers in a joint home loan. Sisters, friends or unmarried couples living together, however, are not allowed to take joint home loans.
LOAN ELIGIBILITY
Eligibility for a home loan goes up for joint home loans as the repayment capacity increases depending on the income of the co-applicants. For example, assume you would like to buy a property worth Rs 1 crore. The bank is ready to fund 80 per cent, or Rs 80 lakh. If your income does not meet this requirement, you might be forced to look at a house which costs less. However, if you apply for a home loan along with your spouse, who draws a regular salary every month, then your joint income will be considered to determine the loan amount. If a woman is the fi rst applicant, or co - applicant, and sole or joint owner of the property, then applicants can avail the home loan at fi ve basis points below the normal applicable home loan rate.
However, as a thumb rule, you must never exceed 35 per cent of your net monthly income as equated monthly instalments (EMIs) for all debts. Anything more than that could cause fi nancial stress, especially when your EMIs rise due to increase in interest rates.
REPAYMENT PROCESS
| POINTS TO PONDER? Co-owners of the property have to be joint borrowers while all the joint borrowers need not be co-owners? Both applicants need to submit all necessary documents? Make sure credit scores of joint applicants do not show delinquencies and defaults? If your credit score is low, make efforts to improve it before you apply for a loan? The repayment record of a joint home loan refl ects in the credit score of all co-borrowers? Default in payment by any partner can impact eligibility for any loan in the future? For tax purposes, it is best to procure a home-sharing agreement, detailing the ownership proportion on a stamp paper as legal proof of ownership? In case of parents and siblings the loan tenure is limited to 10 years |
The repayment process for joint home loans is similar to that of a regular home loan. Payments can be made from a single or joint account through cheques or
electronic clearing system (ECS). Co-borrowers can also share the number of
EMIs between them - a specifi c number of cheques can be issued by one borrower and the balance by the other. Most importantly, repayment of a joint home loan is the collective responsibility of all borrowers. Always remember to pay the EMIs as per schedule. If one of you will fail to pay the EMI then the other will be liable towards payment. In case of any delay or defaults in EMI, legal action is taken against the borrower as well as co-borrowers.
The loan tenure also varies depnding on who your co-borr-wers are. When the spouse is a co-applicant, the duration of loan can be up to 20 years. However, in case of parents or siblings, it is up to 10 years.
WHAT IN CASE OF A DISPUTE?
All home loan applicants should sign a separate legal liability agreement, which clearly defi nes the liability of each applicant and helps sort out the situation in case of a dispute. If you default, the bank can start the recovery process against all co-borrowers.
TAX BENEFITS
If you and your spouse avail yourself of a home loan, both applicants can claim tax benefi ts on servicing of a housing loan. For example, if co-borrowers are servicing the loan jointly in equal proportion, each one can claim tax benefi ts of up to Rs 2 lakh on interest payment, which effectively means, you can claim benefi ts of up to Rs 4 lakh, jointly. This also means that the rate of interest on the loan comes down substantially, resulting in huge savings.
One can get tax benefi ts on home loan up to Rs 1.5 lakh under Section 80C and Rs 2 lakh under Section 24. But if you go for a joint home loan along with your spouse in the ratio of 50:50, then both of you can claim these benefi ts separately. So the combined limit will be Rs 3 lakh under Section 80C and Rs 4 lakh under Section 24. This can reduce your overall cost of loan for the family considerably.
The total deduction will be Rs 7 lakh and, if both spouses are in the highest tax slab, they will get a tax benefit of Rs 2,10,000, which is double compared to an individual home loan. However, this provision may vary from person to person.
Joint home loans are undeniably benefi cial. So, join hands with your better half and make your dream of owning a beautiful home come true.
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