Merits & Demerits of Availing a Joint Home Loan with your Spouse
14 Nov 2019
Availing a home loan is a long term financial obligation and hence you must evaluate your creditworthiness carefully before applying for a home loan. Over the years, home loans have gained massive popularity due to the competitive interest rates and other attractive features associated with them. The prime responsibility of home loan borrowers is to repay the loan amount within the stipulated time. Since home loans are secured loans wherein the purchased property acts as collateral, timely loan repayment becomes crucial. In order to make the repayment process simple and convenient, home loan applicants can consider availing a joint home loan. A joint home loan can not only help borrowers in sharing their debt-burden but also boosts their eligibility to get a higher loan amount. Let us have a quick look at the details of a joint home loan as well as the merits and demerits of availing it:
What is a joint home loan?
It is a home loan that is taken by more than one individual and repaid with equal financial responsibility. While availing a joint home loan, any member of the family, including spouse, parents, siblings or children can be the co-applicants.
Merits of joint home loan
Higher loan amount
If you apply for a joint home loan, the total income increases. This consequently increases your EMI to monthly salary ratio. Therefore, financial institutions consider you as a less-risk borrower and this increases your eligibility for a higher loan amount.
Lower interest rates
With an increased monthly salary in case of a joint home loan, you can negotiate on the home loan interest rate charged by the lending institution. Moreover, some lenders offer lower interest rates to women borrowers if they are the co-owner of the property.
By applying for a joint home loan, both the applicants become eligible for tax deductions. Therefore, a joint home loan is a great way to save tax.
As per section 80C of the Income Tax Act, borrowers can avail tax rebates up to Rs. 1.5 Lakh on the principal amount.
As per section 24 of the Income Tax Act, in case of a self-occupied property, both the applicants can get a discount of up to Rs 2 lakhs.
In case of a rented out property, you can avail tax discounts for the complete interest amount.
Applying for a joint home loan makes you eligible for a higher loan amount. However, it is not mandatory for both the co-applicants to contribute equally towards repayment of loan amount. This provides flexibility in loan repayment as both the applicants can mutually decide who will contribute how much for the repayment.
Demerits of Joint Home Loan
Time-consuming documentation process
Since joint home loans involve more than one applicant, lending institutions often take a long time for the documentation process. Lenders are required to check the credit report of both the applicants as well as verify all the documents to ensure that they are correct and not forged. The whole process can take a lot of time, thereby delaying the loan disbursement.
Impact on credit history
A joint home loan offers flexibility to the borrowers to decide if one or both of the applicants would repay the loan amount. However, it is to be noted that failing to make timely repayment of the loan may affect the credit history of both the applicants.
Divorce cases/ untimely death
If you have availed a joint home loan with spouse and there is a case of divorce, wherein your spouse decides to move out of the loan then the entire burden of loan repayment may fall on the first applicant. If the applicant defaults in repayment, then both the applicants may have to bear legal consequences.
In case of an untimely death of one of the co-borrowers, the surviving spouse has to repay the loan amount. Thus, it is advisable to avail life insurance in order to decrease the financial burden on one applicant in case of demise of the other.
In case you purchase another property, then you won’t be able to avail tax rebates on that property. On the contrary, your second property would be considered to be rented out and you would have to pay income tax on the rent received.
Now that you have a better understanding of the merits and demerits of availing a joint home loan, make sure you evaluate all the aspects carefully before applying for a joint home loan. While availing a home loan, you must compare various loan offers provided to you by different financial institutions. This will help you avail a home loan that best suits your needs. Make sure that you settle for a loan with the most competitive interest rate. Since home loans come for a long tenure, even a slight reduction in the interest rate can save a large amount of money in the long run. In case of a joint home loan, if both the applicants have a high credit score, lenders may offer home loan at an attractive interest rate. Therefore, it is advisable to improve the credit score by clearing the outstanding debts before applying for a joint home loan.
While availing a home loan, you must also compare the processing fees, prepayment charges, repayment options, etc. Home loans available at Finserv MARKETS have no hidden charges. Minimal documentation, instant approval and quick disbursal of the loan amount are some of the major benefits of home loans available at Finserv MARKETS. You can apply for a home loan amount of upto 3.5 crores and choose a repayment tenure up to 25 years. Moreover, you can also customize your loan according to your requirements.
While availing a home loan, it is always advisable to calculate the EMI beforehand with the help of an online home loan EMI calculator. This can help you plan your finances wisely, thereby allowing you to make timely repayment of your home loan.
Lastly, do not forget to read the terms and conditions of the loan agreement carefully before availing a home loan. This can help you avoid any inconvenience in the later stages.
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