Who Can Avail of Joint Home Loans
A conversation in 7:12 Ladies Special aroused my curiosity (though eavesdrop is not the done thing but couldn't help the jam-packed compartment) as it revolved around buying a flat. It was a conversation between two friends, and one of them was a banker. After a time, the conversation took an interesting turn. The young woman in question was looking to buy a flat with a loan to move in with her living-in partner. She wanted to check on whether she can borrow jointly with her aprtner. Just when her banker friend was about to answer after the initial shock (which she skillfully contained), her station came. But this set my thought process on the said conversation. As the society is opening up towards such relationships, it is imperative that such couples, too, get access to credit. But is it really happening?
Going by the experience with banks, I was apprehensive this situation receiving favour with lenders. Clearing my doubt on the matter, Mr. Harsh Roongta, CEO, Apnapaisa says, “Co-borrowing can pose a problem for a small community of couples living together without marriage or even same sex couples, as these relationships are not socially or legally recognised and treated as two friends jointly applying for the loan. The reason for practicing restrictions in giving joint loans is that if some dispute arises between the two borrowers, the income stops getting pooled and there may be the problem in getting the payment of EMIs. Which is why banks do not allow live-in couples or even friends to be joint borrowers as incomes may stop getting pooled in future.”
Lenders are selective in granting joint loans. Joint home loans can be obtained by an applicant along with his/her spouse, parents or own siblings. Some banks allow brothers to take a joint home loan, provided they both are co-owners of the property. (A co-owner is a person who has a share in the property and a co-borrower is one who is liable to pay the loan amount. In some instances, banks insist that co-owners of the home are also co-borrower in a joint loan.)
No doubt, co-borrowing enhances your eligibility for the loans, besides you also get to share down payment amount as banks calculate eligibility by clubbing your income with that of relatives'. In such cases, they insist on making the relative co-borrower. The basic premise behind using pooled incomes for calculating eligibility is that both parties will actually combine their income and pay off all expenses (including the home loan installment). However, banks are selective in extending this concept of pooling of income to other relatives other than spouse, siblings, parents and children.
Besides eligibility, there is another benefit in the form of tax benefit which can be claimed by both co-applicants individually under Section 80 C and Section 24 of the Income Tax Act. The condition in claiming the rebate is that co-borrowers should also be co-owner of the house. The joint account holders (owners of the property) can claim income tax benefits individually. The housing loan benefits that fall under Section 80C and Section 24 of Income Tax Act make each borrower eligible for a maximum deduction of Rs 1 lakh and Rs 1.5 lakh associated to principal repayment and interest payable on the home loan respectively. But if you are just a co-borrower of a loan and not a co-owner in the property, you cannot claim the tax rebates. On the other hand, if the co-owners are equal owners of a property but if the share of the loan is 2:1, the tax benefits can also be availed in the same ratio. But generally banks do not accept split EMI payments.
This way I had my fill on co borrowing and now I am looking forward to meeting my co passenger of 7:12 ladies special some day.
- Bienu Vaghela, Chief Editor, Apnapaisa.com