Benefits of applying for the home loan in Joint name in India


Home loan, nrihelpinfo, joint home loan

Rakesh Verma had planned to buy his home from a reputed developer in the area that he was satisfied with. The cost of the home was 75 Lacs. Rakesh had arranged for the 20% payment (Rupees 15 Lacs) out of his pocket. For the rest of the payment, he approached the bank to avail the home loan.

Before sanctioning Rupees 60 Lacs, the bank asked Rakesh for the following documents:

  1. Salary slip/Form 16 A
  2. A copy of the first page and last page of the ration card or a copy of the PAN/Telephone/Electricity bill as proof of residence
  3. Information on investments (FD certificates, shares, any fixed assets, etc. or other documents substantiating the financial background of the borrower)
  4. Photocopy of the LIC policies with the latest premium payment receipts (if any)
  5. Passport size photograph (as applicable)
  6. Copy of the bank statement of the last six months
  7. Proof of age
  8. Financial information of the guarantor, whenever guaranty is required

Upon presentation of the above documents, Rakesh was confident that his loan application would be approved. However, to his surprise, the bank refused his loan application on account of a low monthly salary.

As a thumb rule, for most of banks/HFCs (Housing Finance Companies) have a provision that one should be left with at least 50-60% of the income after repayment of monthly loan instalment to cover family expenses.

The monthly salary of Rakesh was 80,000 rupees. For which he was able to claim around 40 Lacs Rupees from his bank as a loan amount.

Cost of home: 75 Lacs

Upfront money arranged by Rakesh: 15 Lacs

Loan eligibility: 40 Lacs

Remaining amount: (75-15-40) = 20 Lacs

Well, how is Rakesh going to arrange the remaining 20 Lacs rupees?

To this, Rakesh’s bank manager suggested that he can make his spouse as a joint applicant for the home loan. Rakesh’s wife has been employed for the last 3 years. Her monthly net income was 60,000 rupees. By combining the monthly salary of Rakesh and his wife, the bank was willing to approve the loan amount of Rupees 60 Lacs. Finally, Rakesh was able to buy his dream home together with his wife.

So here are the benefits of applying for home loans in the joint name:

  1. As can be seen from Rakesh’s case above, applying jointly for a home loan increases the loan amount that the bank can sanction for people to buy home.
  2. Also, banks or HFCs feel comfortable to approve the loan in joint name, because of greater security for the lender in view of the option to take recourse to either of borrowers.
  3. Besides improving your loan eligibility and enabling you to obtain a more substantial loan amount, co-borrowers are eligible for deduction under the Income Tax Act. Both borrowers can apply for a deduction, to the extent of their share in the loan, under Section 80C of Income Tax Act 1961 for repayment of the loan, provided that they are also joint owners as well.
  4. Section 24 (b) grants a deduction for the interest of up to Rs 150,000 per annum on an acquiring a residential loan. This deduction is available to both co-borrowers individually. To qualify for the deduction, the home loan must be taken in joint names, property be owned and financed jointly in equal shares, with both spouses being joint owners.

All co-borrowers or joint-borrowers are jointly and severally liable for the repayment of the loan availed from the Bank/HFC, subject to the conditions laid down in the loan agreement. Therefore, before volunteering to become a co-applicant, it is advisable to understand the implication of such a decision.

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Benefits of applying for the home loan in Joint name in India

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