A home loan is probably the largest and the longest debt of your life. Nowadays, the concept of joint home loans is becoming popular. So what is a joint home loan? Simply put, a joint home loan is a home loan where there is more than one borrower. Usually a joint home loan is taken by spouses, or parent and child. In India, banks generally don’t give a joint home loan to friends, colleagues or unmarried partners. A home loan can have upto 6 co-borrowers in India.
The person with whom you take the joint home loan is known as the co-borrower, while the co-owner is a person who has a share in your property. Usually banks insist co-owners to be co-borrowers of the loan. However, the reverse is not necessary. Banks require KYC documentation for all the applicants of the joint home loan. The tenure of the loan sometimes depends on the relationship of the co-applicants of the loan. For instance, if the co-applicants share a parent-child relationship and if the repayment is linked to the parent’s income, then the maximum term of the loan is restricted to the retirement age of the parent.
You need to remember that although the loan is in joint name, the EMI payment will need to be made only by one of the borrowers. That is, the bank accepts only a single cheque or a single debit from an account, and not two cheques for the same EMI payment. However, the number of EMIs can be shared between the co-borrowers. For example, if you take a joint home loan with your wife, you can pay 6 EMIs and your wife can pay 6 EMIs during the year.
A joint home loan has a few advantages when compared to a home loan taken in a single name. An important reason is to be eligible for a larger loan amount. Let’s say you wish to buy a property for Rs. 1 crore, with the bank being ready to fund 80% of this amount. But you realise that your single income is insufficient to meet the bank’s eligibility criteria to grant you such a huge loan amount. In such a case, if your spouse is also working, and if your combined income is sufficient to meet the bank’s eligibility criteria, you can opt for a joint home loan. This way, you will be eligible for a higher loan amount.
The next and probably more important reason why you should take a joint home loan is due to the tax benefits you and your spouse will receive. As the tax liability is reduced significantly at the family level, most working couples opt for a joint home loan. You know that the Indian Income Tax Act allows both principal repayment and interest repayment as eligible deductions from your income. Thus if you take a home loan in your name, you can claim upto Rs. 1 lakh on principal repayment under Sec 80C and upto Rs. 1.5 lakh on interest repayment under Sec 24 (b) of the Act as deductions from your taxable income.
However, if you opt for a joint loan for a self-occupied property with your spouse which is to be held in equal proportion, then both you and your spouse can claim a deduction on the principal and interest repaid separately from both your incomes, to the extent of your share in the loan. For example, suppose you take a joint home loan and the total principal repaid during the year is Rs. 3 lakhs and the total interest repaid during the year is Rs. 4.5 lakhs. Then you and your wife can together claim upto Rs. 2 lakhs on principal repayment (Rs. 1 lakh each) and Rs. 3 lakhs on interest repayment (Rs. 1.5 lakhs each).
A joint home loan thus results in more savings collectively for your family. Therefore it always makes sense to opt for a joint home loan.
Summary – Advantages of a Joint Home Loan
The person with whom you take the joint home loan is known as the co-borrower, while the co-owner is a person who has a share in your property. Usually banks insist co-owners to be co-borrowers of the loan. However, the reverse is not necessary. Banks require KYC documentation for all the applicants of the joint home loan. The tenure of the loan sometimes depends on the relationship of the co-applicants of the loan. For instance, if the co-applicants share a parent-child relationship and if the repayment is linked to the parent’s income, then the maximum term of the loan is restricted to the retirement age of the parent.
You need to remember that although the loan is in joint name, the EMI payment will need to be made only by one of the borrowers. That is, the bank accepts only a single cheque or a single debit from an account, and not two cheques for the same EMI payment. However, the number of EMIs can be shared between the co-borrowers. For example, if you take a joint home loan with your wife, you can pay 6 EMIs and your wife can pay 6 EMIs during the year.
A joint home loan has a few advantages when compared to a home loan taken in a single name. An important reason is to be eligible for a larger loan amount. Let’s say you wish to buy a property for Rs. 1 crore, with the bank being ready to fund 80% of this amount. But you realise that your single income is insufficient to meet the bank’s eligibility criteria to grant you such a huge loan amount. In such a case, if your spouse is also working, and if your combined income is sufficient to meet the bank’s eligibility criteria, you can opt for a joint home loan. This way, you will be eligible for a higher loan amount.
The next and probably more important reason why you should take a joint home loan is due to the tax benefits you and your spouse will receive. As the tax liability is reduced significantly at the family level, most working couples opt for a joint home loan. You know that the Indian Income Tax Act allows both principal repayment and interest repayment as eligible deductions from your income. Thus if you take a home loan in your name, you can claim upto Rs. 1 lakh on principal repayment under Sec 80C and upto Rs. 1.5 lakh on interest repayment under Sec 24 (b) of the Act as deductions from your taxable income.
However, if you opt for a joint loan for a self-occupied property with your spouse which is to be held in equal proportion, then both you and your spouse can claim a deduction on the principal and interest repaid separately from both your incomes, to the extent of your share in the loan. For example, suppose you take a joint home loan and the total principal repaid during the year is Rs. 3 lakhs and the total interest repaid during the year is Rs. 4.5 lakhs. Then you and your wife can together claim upto Rs. 2 lakhs on principal repayment (Rs. 1 lakh each) and Rs. 3 lakhs on interest repayment (Rs. 1.5 lakhs each).
A joint home loan thus results in more savings collectively for your family. Therefore it always makes sense to opt for a joint home loan.
Summary – Advantages of a Joint Home Loan
Smitha Hari
Team GettingYouRich.com
Team GettingYouRich.com
0 Comments