Home Mortgage loan Is it a good decision to add a co-applicant to your mortgage?

Is it a good decision to add a co-applicant to your mortgage?

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A joint home loan allows two or more family members to qualify for a home loan with shared repayment responsibility. Most people opt for such a loan to improve their mortgage eligibility or reduce interest charges. Lenders require applicants to add their co-owners as a co-borrower for properties co-owned by two or more family members.

Advantages of the solidarity mortgage

Improves loan eligibility: Lenders consider several factors when evaluating mortgage loan applications, the main one being income, credit rating, credit profile, and affordability of equivalent monthly payments (EMI) . In such cases, bringing in an income earning family member who has a good credit rating as a co-applicant can improve loan eligibility.

Ratan Chaudhary, Head of Home Loans, Paisabazaar.com, said: “Adding a co-applicant further reduces credit risk for lenders, as co-applicants are also responsible for loan repayment. This process can help improve the chances of getting the loan approved. “

Chaudhary further stated, “Lenders also take into account the income of the loan seeker when calculating EMI accessibility. Adding a co-applicant can help take advantage of the larger loan amount. Also, since most lenders require borrowers to repay the loan before age 70, loan applicants approaching their 60s may be turned down or asked to opt for a shorter loan term and higher MEIs. . Adding a younger co-applicant can help these borrowers qualify for loans with a longer tenure. “

Higher tax benefits: The repayment of a home loan gives the right to income tax deductions. Repayment of the interest component of up to ??2 lakh for self-employed property gives right to a tax deduction under section 24B of the Income Tax Act. Likewise, the reimbursement of the principal component up to ??1.5 lakh each fiscal year gives entitlement to a tax deduction under Article 80C. The principal applicant and the co-applicants can independently benefit from these tax advantages according to their contribution to the repayment of the loan. “Adding a co-applicant can help achieve higher overall tax benefits. However, note that co-applicants can only benefit from these tax advantages linked to the mortgage if they are co-owners of the property concerned, ”said Chaudhary.

Benefit from a lower interest rate for female co-applicants: Many mortgage lenders offer concessions on mortgage interest rates to female co-applicants. Adhil Shetty, CEO of BankBazaar.com, said several banks and non-bank financial corporations (NBFCs) offer their lowest mortgage rates to female borrowers. Year after year, we have seen women take out larger mortgage loans on average than men.

“Women present themselves not only as the main borrowers of these mortgage loans, but also as co-applicants for loans taken out by their husbands. Lower rates allow families to pay their contributions more quickly, ”added Shetty.

Flexibility of repayment: Although having a joint mortgage loan makes the principal applicant and co-applicant equally responsible for repaying the mortgage, they have the freedom to share the burden of repaying the IME.

Disadvantages of the solidarity mortgage

Negative impact on credit score for non-repayment of EMIs: You should know that co-applicants for home loans are also responsible for timely repayment of the loan. In addition, the credit bureaus also record any home loan EMI delay or default in the credit report of the principal applicant and co-applicant. Thus, in this way, it can negatively affect the credit rating of principal applicants and co-applicants.

Shetty said, “Keep in mind that any issues between the co-applicants can lead to difficulty in repaying the loan, which could impact the credit history of both borrowers. In the most extreme cases, their property could be repossessed by the lender to recover the unpaid contributions. “

Who can be a co-applicant on a home loan: Lenders typically only allow spouses or other blood relatives of the principal applicant to become a co-applicant, but some lenders may not approve joint home loans to brothers and sisters or unmarried partners. Lenders generally require that all co-owners of the property become co-borrowers of the mortgage.

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