According to research, approximately 70% of homebuyers end up buying a house that is 20% costlier than the one they had initially budgeted for. This is why many people apply for home loans to raise additional capital. Lenders often limit the borrower’s home loan eligibility based on income and assets – making it harder for them to own their dream house. But there is a way to solve this problem: a joint home loan.
A joint home loan combines the credit worthiness of multiple people, enabling them to secure bigger home loan amounts without scoffing-off anything. Here’s how a person can secure a joint home loan and the tax benefits for applying for one.
What is a joint home loan?
A joint home loan is a type of housing loan availed by more than one person simultaneously. All the participants of a joint home loan – also known as co-applicants – are equally responsible during the loan repayment. This decreases each applicant’s individual liability, making the home loan interest payments easier.
Due to COVID-19’s implications, lenders have started facilitating all kinds of joint home loan online, ensuring the safety of applicants.
Eligibility for a joint home loan
A person who is eligible for a joint home loan is known as a co-applicant, who partners with the main borrower while applying. Here are a few conditions every co-applicant has to comply with before collaborating with the main borrower:
- The co-applicant must be someone from within the family – preferably an immediate family member. It could be parents, spouse, siblings or children.
- The total number of applicants in a joint home loan must be minimum 2 and can go up to six. Nevertheless, the maximum limit varies between different banks/NBFCs.
- The co-applicants in a joint home loan must be earners – salaried, self-employed, business person or professional. Non-earning individuals don’t provide any tax/eligibility benefits to a joint home loan.
- The co-applicants must also be co-owners of the house, or else tax benefits won’t be availed.
Tax benefits of a joint home loan
Co-applicants of a joint home loan can avail tax-benefits in the following ways:
- When the property is self-occupied: All co-applicants, who are also the co-owners can claim deduction either worth Rs. 2,00,000 each for home loan interest, or their proportion of the home loan interest rates; whichever is less. For instance, if the payable interest proportion of a co-applicant is Rs. 2,25,000, the maximum deduction claimed will be Rs. 2,00,000 only.
- When the property is on rent: Co-applicants can claim interest deduction if the rented property is limited to an amount to which the property’s loss doesn’t exceed Rs. 2,00,000.
Apart from the deduction on all the home loan interest rates in India, every co-applicant (given that they’re a co-owner) can claim Rs. 1,50,000 as a tax deduction on repayment of principal, pertaining to section 80C.
Moreover, the borrower can avail quickly repayable, easy home loan through a joint home loan. They can calculate deductions using home loan calculators. For example, a home loan EMI calculator generates the repayable EMIs that help in assessing the greater value out of deduction limit or actual EMI.