Having a co-applicant could enhance your Home Loan eligibility. But you can’t just add anyone as a co-applicant. Here are the terms and conditions.
We often get the question, ‘What do you mean by co-applicant on a Home Loan?’ As you might know, you can apply for a Home Loan either as a single applicant or along with other borrowers as co-applicants. A co-applicant for a Home Loan is a co-borrower. Co-owners are always co-borrowers but all co-borrowers need not be co-owners. This means that any person who is a co-applicant needn’t own the house being bought.
Can anyone be a co-applicant? No. There are many terms and conditions imposed by lenders when you want to add a co-applicant to your Home Loan application. But let us first look at the advantages of adding co-applicants.
The main advantage of adding a co-applicant to your loan application is that it enhances your eligibility for the Home Loan. In the case of a joint loan, the income of all co-applicants will be considered while determining eligibility. However, you must understand that the income of co-applicants will be considered for loan eligibility only if such income is regular.
Additional Reading: Your Guide To The Home Loan Application Process
All co-applicants are equally liable to repay the loan. So, in case you are not able to pay your EMIs, you can ask your co-applicants to pitch in.
All co-applicants in a Home Loan can avail the tax benefits that come with it. This includes the principal repayment benefit under Section 80C for up to Rs. 1.5 lakhs and the interest repayment benefit for Rs. 2 lakhs under Section 24 of the Income Tax Act. However, co-applicants can claim the tax benefits only in the proportion in which they own the property. Property is not in their name? They won’t be able to claim tax benefits.
If the total interest or principal paid is more than the permissible limit, then each co-applicant can claim the maximum benefit. For example, if total interest paid in a year is Rs. 5 lakhs and total principal paid is Rs. 5 lakhs and there are two co-applicants, then each of them can claim Rs. 2 lakhs for interest repayment and Rs. 1.5 lakhs for principal repayment.
Additional Reading: Should I Prepay My Home Loan If I Get Extra Money?
Now, that you know the advantages of having co-applicants, let’s look at the terms associated with it.
Who can be your co-applicant?
Not all relationships are acceptable by lenders. Friends or those who are not blood relatives are generally not allowed to be co-applicants. So, a co-applicant can be your spouse, parent or any other blood relative. It is important to check with your lender about adding a relative as a co-applicant before actually filling up that application.
As we mentioned earlier, lenders require all co-owners of a property to be co-applicants of the loan. However, the reverse needn’t be true. That is, co-applicants in a Home Loan need not necessarily be co-owners of the property. However, the owner of the property should always be the primary applicant of the loan.
Additional Reading: All You Need To Know About Home Loan Eligibility
Spouse: Husband and wife can be co-applicants of the loan even though they may not be co-owners of the property. The maximum tenure of the loan will be determined based on the retirement age of the oldest applicant.
Siblings: Can brothers take a joint Home Loan? Certainly. Two brothers can be co-applicants on the Home Loan though some lenders insist that the brothers stay together on the same property and continue to stay together in the new property as well. Also, some lenders might insist that the two brothers be the co-owners of the property. However, a brother and sister cannot be co-applicants for the loan. Similarly, two sisters cannot be co-applicants when applying for a Home Loan.
Parent and minor child: A parent cannot co-apply along with his/her minor child for a Home Loan. Co-applying with one’s son or daughter is possible but is subject to the conditions given below:
Additional Reading: Tips To Manage Your Home Loan
Son and father: The rules pertaining to a son and father being co-applicants are quite clear. If there is only one son, then either the son or the father can be the main owner. However, both should be joint owners of the property. The income of the son as well as the father can be considered if the borrower wants the lender to do so.
The maximum tenure is generally restricted to the retirement age of the father in this case. In case the father has more than one son, lenders might insist that the father not be the main owner of the property. This is because all sons are legal heirs to the property after the father’s demise. However, the father can be the co-applicant and his income can be considered for increased eligibility of the Home Loan.
Daughter and father: An unmarried daughter can apply for a Home Loan jointly with her father. However, many lenders impose a condition that the father’s income should not be considered while determining the eligibility amount. Further, they might state that the property should be in the name of only the daughter. The intention of this law is to avoid disputes at a later date when the daughter is married.
When there are co-applicants, it means that there are many applicants for the same loan. So, documents pertaining to a single applicant are not enough. Documents such as income proof, bank statements, and other details, for all the co-applicants need to be submitted. This will include Know Your Customer (KYC) details such as address proof and proof of co-ownership of the property.
Additional Reading: Home Loan Document Checklist
Terms for property under dispute
If the property secured by a joint loan comes under dispute, each of the co-applicants is liable. This means that in the case of a default, the bank can proceed with the recovery process against all the co-applicants.
Additional reading: Home Loan Handbook: All Questions Answered
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