Joint mortgage loan: advantages and disadvantages of adding a co-applicant to your mortgage

Adding a co-applicant would increase your overall loan eligibility. However, it is important to weigh the pros and cons before making the decision to opt for a solidarity mortgage.

The rejection of your mortgage application can set you back in achieving your dream of becoming a homeowner. Since adding a co-applicant can help you get out of such scenarios, it’s important to weigh the pros and cons before making the decision to go for a joint home loan. Below are things to keep in mind before submitting a joint mortgage application:

1. Improves loan eligibility

Borrowers often have difficulty getting their home loan application approved due to failure to meet various eligibility criteria such as minimum income, debt-to-income ratio, credit rating, etc. In such cases, adding a co-applicant would increase your overall loan eligibility and even help qualify for a higher loan amount, if necessary. When you take out a joint mortgage loan with a creditworthy co-applicant who has a good credit rating and satisfactory repayment capacity, your chances of getting a loan improve. However, make sure that your debt ratio and that of the co-applicant does not exceed 50 to 60%. Failure to do so may result in rejection of the home loan, or you may have to settle for a loan with a higher interest rate.

2. Higher tax advantages

Most home buyers are familiar with the tax benefits available on home loans under Sections 80C and 24b of the Income Tax Act. Interest repaid by the borrower can be deducted under section 24b, up to Rs 2 lakh each year, while the principal repaid is eligible for deduction under section 80C, up to a maximum of Rs 1.5 lakh per year. Not everyone may know that a joint mortgage application allows co-borrowers to separately benefit from these tax advantages. However, do not forget that the co-borrower can only benefit from a tax advantage if he is also the co-owner of the property. Only those who are both co-borrower and co-owner can benefit from the tax advantages.

3. Lower interest rates for female co-applicants

Many lenders offer differentiated interest rates for female mortgage co-applicants. These rates are typically about 0.05% (5 basis points) lower than the standard rates provided by the lender. To benefit from such an advantage, women must be either the sole or co-owner of the property concerned, and also the principal or co-applicant of the mortgage.

Most banks generally only accept women as co-applicants if the woman is either the owner / co-owner of the property concerned, or if her income has been taken into account when assessing loan eligibility and capacity. reimbursement.

4. What to watch out for

Lenders assess your joint loan application based on your credit scores, income, age, debt to income ratio, etc. Your loan application may be rejected if your co-applicant’s credit rating is lower, as lenders are reluctant to lend to those who do not have disciplined credit repayment behavior. Lenders will only approve a joint loan application if the repayment capacity of the principal applicant and the co-applicant is satisfactory. Also, keep in mind that the rejection of a home loan application can further lower your credit score. In some cases, lenders may consider lending you at a higher interest rate instead of outright rejecting your joint loan application.

(By Ratan Chaudhary, Head of Home Loans, Paisabazaar.com)

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