4 Ways Taking a Joint Home Loan Can Save You Lakhs

Buying a home is a major decision for any person. A lot of thought goes behind such a big purchase decision of the home. It could be a dream home for a new buyer or it could be an investment opportunity for another. With the prices of houses being very high many people could not get a home without taking a home loan. Also in some cases the person could not be eligible for a loan on their own. This is where a joint home loan can be beneficial to you.

What is a home loan?

Home loan is offered to individuals or a group provided they are blood relatives, who wish to construct or buy a house. The property bought or about to be constructed is mortgaged as collateral until the repayment of the loan is completed with full interest. The repayment of the loan generally depends on the capacity of the borrower. Normally, the home loan tenure ranges between 5 to 30 years. The borrower can opt either for floating type of interest or fixed interest rate. Home loan provides tax benefits to the borrowers.   

Who can be co-borrower?

A home loan can accommodate up to six co-borrowers. The co-borrower can only be a blood relative like father, mother, brother, sister etc. In the case of blood relatives, to be eligible for a joint home loan they need to be a co-owner of the property. This rule is relaxed in the case of spouse as they only need to be a co-applicant to be eligible for a joint home loan.

A point to note is that if the borrower defaults there is considerable effect on the credit history of the borrower. 

Documentation Process

The documents required for a joint loan is similar to an individual loan where you will need to submit documents like identity and address proof, income proof and proof of co-ownership of the property.

Benefits of taking a joint home loan

There are 4 major ways a joint home loan can be beneficial to you.

1. Loan eligibility

In some cases, you as an individual may not be eligible for a home loan or even if you do get a loan it may be with higher interest rate as you have a bad credit score. In such a case a co-applicant with good credit score and help boost your chances of getting a loan with good interest rate.

2. More loan amounts

With a joint home loan, you will be eligible for a higher loan amount as you’re paying capacity or capability has improved. This could reduce the capital that you have to invest and also with more money can get a good home at a good locality.

3. Tax benefits

The income tax benefits are the same for all individuals, but the overall savings for the co-owners or co-applicant in the case of spouse, on tax is very high. As an individual you can claim tax deductions on the interest paid on home loan under section 24(b) of the income tax act and also claim tax deductions for principal paid on home loan under 80c of the income tax act. This is besides the option where the co-borrowers can split the amount paid for registration and stamp duty under section 80c. The borrowers can get maximum benefits on tax if they buy the property between the months of January and March as the financial year in India ends in March and they can claim the registration fees and stamp duty under 80c in full without losing out on the principal payment as it will only begin from the next financial year.  

Overall for any individual a maximum of 1.5 lakhs can be claimed under section 24(b) and 2 lakhs under section 80c. In case of a co-borrower from the same family like say a spouse then you will save 3 lakhs under section 24(b) and 4 lakhs under 80c, which adds upto 7 lakhs each year on taxes. The ratio need not be 50-50 partnership it could also be 60-40 ownership of the property with the person with higher salary can claim more tax benefits.

4. Special interest rates for women  

Some banks give a lower interest rate for women co-borrowers with the condition that the women are also co-owner of the house. This will help in the long run reducing the amount of interest paid.