A Home Loan is a huge responsibility. But, with a co-applicant, you can share this responsibility and ease the financial burden. Learn all about a co-applicant in a Home Loan.
Taking a Home Loan is a big responsibility to shoulder. There are multiple factors associated with a Home Loan and it’s not always possible to take this on single-handedly. Sometimes, things like eligibility, income, and the loan amount and tenure can be a tad difficult to handle with a single income. In such cases, the applicant can choose to take a loan alongside a co-applicant.
In other words, two people can apply for a single loan by being co-applicants and take over responsibility towards the loan.
Additional Reading: Watch Out For These 6 Important Things When Getting A Home Loan
Who is a co-applicant?
A co-applicant refers to a person who applies along with the borrower for a loan. This is done so that the income of the co-applicant can be used to supplement the borrower’s income and increase his/her eligibility.
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Can anyone be a co-applicant?
No, Banks and Housing Finance Companies (HFCs) have allowed only a few specified relations to be co-applicants. Although, it must be noted that it is not a compulsion or legal requirement to have a co-applicant. Banks also do not allow a minor to be a co-applicant.
You also need to note that any co-owner has to compulsorily be a co-applicant to the loan.
Additional Reading: Terms For Adding Co-applicants To A Home Loan Application
Who can be a co-applicant to my Home Loan?
Most of the banks in our country allow a few specified relations to be co-applicants. Brother-brother, father-son, mother-son, husband-wife etc. are acceptable combinations to be borrowers and co-applicants.
- Father and son
In case of father and son, if the borrower is the only son, then, he can jointly apply with his father where both their incomes will be taken into consideration. The property should be in their joint names.
In case a person has two or more sons and if he wants to apply jointly with one of them or both of them, then he should not be the main owner of the property. This is because, on his death, his children should succeed to the property jointly and may cause an inheritance dispute. In this case, the father can only be taken as a co-applicant and his income may be considered for the loan. He may be the co-owner or not own the property at all.
- Unmarried daughter and father
An unmarried daughter is eligible to apply jointly with her father. In this case, unlike father and sons, the property has to be only in the name of the daughter and the income of the father should not be considered. This is to avoid any legal complications later on when the applicant (daughter) gets married.
- Unmarried daughter and mother
An unmarried daughter is eligible to apply jointly with her mother. In this case, unlike father and sons, the property has to be only in the name of the daughter and the income of the mother will not be considered.
- Brother and brother
A brother may apply with his brother, provided, they are currently staying together and be determined to do so in the new property as well.
- Husband and wife
One can include one’s spouse as a co-applicant for a Home Loan. His or her income will be included for working out the loan eligibility. In fact, from a bank’s perspective, this is an ideal situation and they would be very happy to have the husband/wife as co-applicants.
Additional Reading: Home Loan Document Checklist
Who cannot be co-applicant?
As can be understood from the above discussions the following relationships cannot be a co-applicant for a loan:
- Married daughter & mother/father
- Sister and sister
- Sister and brother
What is the role of a co-applicant?
A co-applicant is completely responsible for the loan if the partner defaults, dies or otherwise refuses to participate in the partnership. The bank will pursue collection from one applicant without consideration of the partnership agreement.
Experts say that technically, a co-applicant becomes a co-borrower and by being a co-borrower, he is liable for the repayment of the loan and other dues.
Thus, a co-applicant becomes equally liable for repayment of the loan amount in case of non-payment by the borrower. The co–applicant will also be responsible for repayment of the loan in case of death of the primary borrower, even if there is insurance cover to the primary borrower.
Many banks and financial institutions insist on having a co-applicant but it is more of a necessity than a requirement. There is no legal requirement to have a co-applicant.
Additional Reading: Home Loan Handbook: All Questions Answered
Benefits of having a co-applicant
- Higher success rate of your loan approval
- Increased eligibility can help you buy a bigger house and get a bigger loan too
- Tax benefits for both the applicants and co-applicants
Additional Reading: 5 Hidden Home Loan Tax Incentives
Check out these tax benefits before you apply for your Home Loan. And if you think you’re ready to take a Home Loan, then you’ve come to the right place.
Additional reading: Home Loan Handbook: All Questions Answered