Opting for a joint Home Loan is one of the best options to get a higher amount and better tax benefits.
All of us desire to have a house of our own someday. But booming real estate prices make affordability difficult and this is where a Home Loan comes to your rescue. You can either consider taking a Home Loan individually or may consider taking a joint loan, which will not only help you in debt sharing but will also get you a loan of higher value. Besides a joint Home Loan can also help you in getting tax benefits. A joint Home Loan can be taken by two or more people after clubbing their income.
Let’s look at the five ways in which a joint Home Loan works to your advantage-
Higher Loan Sanction
The first benefit of opting for a Joint Home Loan is that it allows you to borrow an amount of greater value. The lender, in this case, will not just consider your income but will consider the income of your co-borrowers as well and hence a higher amount of money can be borrowed in joint Home Loans.
Better Chances of Loan Sanction
Joint housing loan works best for those households where one person’s income is not enough to get a loan sanctioned. But if he/she brings on a co-borrower on board, be it spouse, mother, father, working children etc., then the income of more than one person is combined, which raises the repayment capacity. This further improves the chances of getting the loan approved.
Probably the best reason why salaried individuals, in particular, opt for a joint Home Loan has its tax benefits. The Income Tax Act provides that a borrower can claim an exemption under Section 80 C up to Rs 1,50,000 for the principal repayment and up to Rs 2,00,000 on the interest amount under Section 24.
However, in case of a joint loan, all the co-owners can claim for deductions to a maximum of Rs 4,00,000 on interest paid jointly and Rs 3,00,000 on principal paid in a financial year. The tax benefits are calculated in the same ratio as the loan is sanctioned and each individual’s exemption limit stands.
Sharing Burden of Debt
While getting a house loan is the initial hurdle, repaying it on time every month is the main challenge with several other expenses to account for in a household. A joint loan helps share the burden of the debt with the co-borrower. In situations where a person becomes unable to pay the EMI for a particular month, the co-borrower can take responsibility. The risk of defaulting on loan payment is also lesser as there will always be the co-borrower who will share equal responsibility to pay the instalments or repay the loan.
In case of a Home Loan taken individually, the responsibility of repaying the amount will be on one person only thus forcing him-her to opt for lower EMI amounts and a longer tenure, thus increasing the total interest being paid out. But in case of a joint Home Loan, the responsibility of repaying the amount is divided and hence there is a higher possibility that the borrower will be able to get rid of the repayment soon and end up paying much lesser interest.
If you are planning to get a Home Loan, take a little more time and consider approaching a co-borrower as the benefits of opting for a joint Home Loan are far more than a loan with only one borrower. Spouses are the ideal co-borrowers for a joint Home Loan, but one may even take loans jointly with parents or siblings. Friends, unmarried partners are however not allowed to borrow loans jointly. Make sure to assess both yours and the co-borrowers financial situation before rushing into taking a loan together.