Joint Home Loans

A joint home loan is one that you take along with a family member, where both of you share the responsibility of repaying it. Your spouse, parents, or siblings can be your co-applicants for such a loan.

By applying for a joint home loan, all co-applicants can enjoy tax benefits as per the Income Tax Act, 1961. 

These include:

• Section 24 (B)

A borrower can claim a deduction of up to ₹2 Lakhs on the interest portion of the EMI

• Section 80 (C)

A borrower is eligible to claim a tax deduction of up to ₹1.5 Lakhs on the principal portion of the loan EMI

• Section 80 (EE)

A first-time home loan borrower can get a deduction of up to ₹50,000 on the interest paid over and above the deductions claimable under Section 24 (B)

Note that each applicant is eligible to get a deduction of up to the maximum amount allowed under each section. For example, both co-applicants can get a tax deduction of up to ₹2 Lakhs each on the interest paid for the home loan, as per Section 24 (B).

Each co-borrower is liable to repay the loan with applicable interest, regardless of their share in the property. Their loan share is also important in determining the repayment schedule and tax deductions claimable. 

Unless the property agreement states otherwise, it will be assumed that each co-owner owns an equal share of the property. To understand this better, let’s take the example of two applicants, Mr. Ram and Mr. Suraj, who have a loan share of 60:40. 

Here, the loan EMI amount is ₹10,000 and they are liable to pay the same as per their loan share. This means, the instalment will be split into ₹6,000 and ₹4,000, between Mr. Ram and Mr. Suraj, respectively. 

Similarly, the tax exemption will be calculated on each individual’s share of the EMI paid. So, for Mr. Ram, the deductions will be calculated on the ₹6,000 paid by him each month. Bear in mind that the total exemption claimed by all co-borrowers cannot exceed the actual EMI payment made to the bank.

When you take a joint home loan, you might come across two terms – co-applicant and co-owner. These are not the same.

A co-applicant is someone who applies for the loan with you to improve your eligibility. Their income is added with yours, which can help you get a higher loan amount. They can also claim tax benefits, even if they don’t own the property.

A co-owner is someone who shares the ownership of the property with you. If a person is a co-owner, they must also be a co-applicant. But if someone is just helping with the loan and doesn't own the property, they can be a co-applicant without being a co-owner.

In some cases, like when a woman is added as a co-applicant, most lenders require her to also be a co-owner to offer lower interest rates.

Provided below are some common conditions you should fulfil before applying for a joint home loan to have a better chance of getting your application approved:

• You can have a maximum of 6 co-applicants and a minimum of 2 co-applicants for a joint home loan

• You cannot avail a joint home loan with any random individual, including your friend/s or business partner/s

• Each co-applicant has to fill in a separate application form and provide individual documents for the same 

• Repayment for a joint housing finance plan can be done through a joint account of the co-borrowers or by splitting the EMI equally or proportionally among them

Before you apply for a joint home loan, here are a few important factors you need to be concerned about:

Documents

Make sure you and your co-applicant have all the necessary documents ready. These include KYC documents, income proofs, and property-related papers. Having everything in order can help speed up the approval process.

Home Loan Amount

Have a clear idea of how much loan you actually need. You can use the free home loan calculator available on Bajaj Markets to estimate the right amount based on your income and repayment capacity.

Credit Score

Lenders check the credit score of both applicants while evaluating your loan application. If either of you has a low score, it could impact your chances of approval or affect the joint home loan interest rate offered. So, it’s best to check and improve your credit scores before applying.

Loan Repayment Responsibility

Both you and your co-applicant will be equally responsible for repaying the loan. You can choose to pay EMIs from a joint bank account to manage it smoothly. Remember, any delay or default by one applicant can affect the credit history of both.

While applying with a co-applicant can boost your loan eligibility and offer tax benefits, there are situations where going solo might be the better option. 

Here’s when you should reconsider adding a co-applicant:

You’re Eligible on Your Own

If you qualify for the home loan by yourself, there's no need to add a co-applicant. This way, you can preserve your spouse’s eligibility for future loans.

Your Credit Score or Existing Loan Affects the Application

If your credit score is low or you’re already repaying another home loan, having a co-applicant might not significantly improve your eligibility. In such cases, the advantage of co-application may be limited.

You’re Buying Property as an Investment

Adding a co-applicant makes more sense when you're purchasing a home to live in. For investment properties, a joint loan may not always be necessary.

Shared Responsibility Can Get Complicated

Keep in mind that a joint loan means shared responsibility. If this isn’t clearly defined, it could lead to issues, especially in situations like legal separation or divorce.

The eligibility criteria for a joint home loan vary across lenders in India. The general eligibility conditions for a joint home loan are as follows:

• You must be a citizen of India

• You should be aged between:

  • 22 and 62 years, if you are a salaried applicant

  • 28 and 70 years, if you are self-employed applicant

• Work experience should be a minimum of 3 years (for salaried applicants) or 5 years (for self-employed applicants)

• Your CIBIL score should be over 750

All the co-applicants need to provide the following documents along with joint home loan application:

• Proof of Identity - Aadhar card, PAN card, Voter ID, Passport, etc.

• Proof of Residence - Aadhar card, Voter ID, Passport, rent agreement, utility bills

• Proof of Income - Bank account statements of the last 3 months, ITR of the last two years, salary slips of the last 3 months, and/or Form 16

• Property Documents - Past title claims, sales deed, conveyance deed, allotment letter, possession letter, latest property tax receipt, and copy of approved construction/extension

• Recent passport- size photographs

Here are the different types of co-applicants you can apply with for a joint home loan:

Female Co-applicants

If you apply for a joint home loan with your wife, mother, or sister as a co-applicant with a regular income, you may enjoy several benefits.

Such as:

• You and your female co-applicant can claim income tax deductions separately on the EMI payments under Section 80(C) and Section 24(B) of the Income Tax Act

• You can also get a concession on the registration fee and stamp duty if the property is registered in the name of the female co-applicant 

• You become eligible for a higher loan amount as two earning co-applicants increase the total creditworthiness

Parents

If your income is insufficient, you can add your parents as co-applicants to increase your overall creditworthiness. This can help you obtain the desired amount of home loan. The tenure of a joint home loan depends, to a large extent, on the age of the oldest co-applicant. 

Thus, the loan tenure may be limited to your parent's retirement age. This may result in your EMI amount being higher. 

Siblings

If you apply for a joint home loan with your sibling(s) who has/have a regular source of income, you can get a number of benefits. These include separate tax deductions for all co-applicants and easy negotiation of loan terms. 

Keep in mind that many states charge a lower stamp duty/registration fee for women. Also, having a working co-applicant can help you negotiate for more favourable loan terms and conditions such as a lower interest rate or a longer tenure.