Well, adding a co-applicant in your home loan will be a game changer for lowering interest rates, better terms, quick approval, and more. But the question is who can be a co-applicant? Let’s clarify here:)
What exactly is a co-applicant is? A co-applicant is someone who applies for a loan together with the main borrower. For a home loan, the co-applicant helps repay the loan if the main borrower fails.
A co-applicant shares the legal obligation to repay the home loan. If the main borrower fails to repay then the co-applicant has to pay the loan.
The co-applicant's income, credit score, and other financial details are taken into account by the lender.
The co-applicant does not necessarily have to be a co-owner of the property, but in most cases, lenders prefer that the co-applicant is also a co-owner.
The rules can vary slightly from lender to lender. Here are the most common relationships allowed by lenders:
Why It’s Common: People often choose their spouse as a co-applicant for a loan because combining both incomes can help them qualify for a bigger loan. Additionally, since married couples usually share financial responsibilities, it can be easier to manage paying back the loan.
Example: A husband and wife in Mumbai jointly apply for a home loan to buy their first home. With their combined income, they qualify for a loan amount of INR 70 lakhs, which they might not have been eligible for individually.
Key Points:
Most lenders prefer married couples as co-applicants.
Some lenders may offer better interest rates or loan terms for married couples applying together.
Why It’s Considered: Young people buying a home can ask their parents to be co-applicants for the loan. If you don’t have much work experience or income, having your parents as co-applicants can help you get a larger loan, especially if they have good credit and a steady income.
Key Points:
Parents can be co-applicants whether or not they are co-owners of the property.
Parents with a good credit score can positively influence the loan terms.
Why It’s an Option: Siblings can apply together for a home loan, especially if they are buying property jointly, like two brothers or a brother and sister. However, some lenders may have rules about which types of siblings can apply together, often preferring brothers as co-applicants.
Key Points:
Most lenders prefer siblings of the same gender as co-applicants.
Some banks may have specific rules regarding which siblings can be co-applicants.
Why It’s Considered: Sometimes, adult children can join their parents as co-applicants for a home loan. This usually happens when the parents are retired or close to retirement and don't have enough income on their own. Adding their working children as co-applicants can help them get the loan they need.
Key Points:
Lenders may require that the property is co-owned by both the parents and children.
Children can help parents qualify for a larger loan or better terms.
Why It’s Rare: Sometimes lenders also accept other people, like unmarried partners or distant relatives, as co-applicants for a loan. However, this isn’t very common and each lender has its own rules. It’s important to ask your lender about their specific policies on who can be a co-applicant.
Key Points:
Unmarried couples or distant relatives may be accepted by some lenders, but it is not the norm.
Lenders typically prefer close family members as co-applicants due to the higher trust factor.
Important Note: Spouses, parents, and siblings are often chosen as co-applicants, but different lenders have their own rules about who can be a co-applicant. So, you should check with your lender to find out their specific requirements.
Having a co-applicant is helpful because you can combine both incomes, which makes it easier to qualify for a larger loan. This is especially beneficial if the main applicant's income isn’t enough on its own to meet the lender’s criteria.
Lenders are more likely to approve joint home loan applications if the co-applicant has a good credit score and steady income. This can result in lower interest rates and better loan conditions, which makes the loan cheaper overall.
If both the main borrower and the co-applicant are co-owners of the property, they can both get tax benefits for the home loan. They can each claim up to INR 1.5 lakhs for repaying the loan principal under Section 80C and up to INR 2 lakhs for paying interest under Section 24(b) of the Income Tax Act.
Having a co-applicant helps share the responsibility of paying back the loan, which makes handling monthly payments (EMIs) easier. This can be especially helpful if unexpected financial problems arise, as the repayment isn’t solely the responsibility of one person.
| Aspect | Details |
|---|---|
| Common Co-Applicants | Spouse, parents, siblings, children.
|
| Eligibility Criteria
|
Close family relationship, age (18-70 years), stable income, good credit score, property co-ownership (preferred).
|
| Advantages
|
Increased loan eligibility, better interest rates, tax benefits, shared responsibility, enhanced credit profile.
|
Picking the right person to join you on your home loan application can greatly impact how much you can borrow, the interest rates you get, and your financial planning. The co-applicant’s financial health and credit score are important for getting better loan terms.
Common co-applicants include spouses, parents, and siblings. These individuals are usually eligible because their income and credit history can support the loan application.
Yes, a business partner can be a co-applicant if they are also co-owners of the property. However, this is less common and depends on the lender's policies.
Distant relatives can be co-applicants, but this is less common and may depend on the lender’s guidelines. Generally, lenders prefer closer family relationships.
If the co-applicant has a poor credit history, it can hurt the chances of getting the loan approved. Lenders prefer co-applicants with good credit histories because it helps in getting the loan approved more easily and securing better loan terms.
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