You can take an informed decision regarding joint home loan. There are many opportunities and possibilities in the world of finance and loans. Make your choice wisely, keeping in mind what will be best for your future goals. It becomes easier for you to buy a more expensive property or buy a custom property with premium features.
Taking a joint home loan is a good way, it increases your chances of getting the loan, and you can also get tax benefits. This can be called a smart financial decision, although it may come with many challenges and risks. Therefore, if you are also thinking of taking a joint home loan, then before taking the decision, know thoroughly about its advantages and disadvantages.
Benefits of applying for joint home loan
- Whenever you apply for a joint home loan, approval for the loan is given keeping in mind the income of both of you, this increases your loan eligibility.
- By combining the income of both, your financial profile becomes stronger and you can get approval for a higher loan amount.
- This way, you get faster approval for the loan – Applying for a joint home loan strengthens the financial profile and increases the chances of getting approval for the loan.
- If the candidate applying with you has a good credit score, you will get approval easily even if your credit score is low.
- Loan granting banks review the background of all applicants, as repaying the loan is an equal responsibility of all applicants.
Competitive home loan rates
- By taking a joint home loan, you can avail the benefit of better interest rates. For example, if both the applicants have a good credit history, then the combined credit score of both will become stronger. Therefore, the loan giving bank will offer you cheaper interest rates.
- The second reason is that in case of joint home loan, the risk is reduced because the bank giving the loan considers the repayment capacity of both. This increases the chances of getting a loan at a better interest rate.
saving in tax also
- You can also get tax benefits under the old regime in joint home loan. Every applicant can claim deduction up to Rs 2 lakh per annum under Income Tax Section 1961 for the interest paid on his property.
- That is, if seen practically, a couple together can avail the benefit of saving up to Rs 4 lakh annually.
- Apart from this, if you apply for a joint home loan, you can claim a deduction of up to Rs 1.5 lakh every year under Section 80C for the principal repayment portion of the home loan.
- Apart from this, benefits of other investments like PPF, life insurance premium are also available under Section 80C. First-time home buyers can avail additional exemption of up to Rs 50,000 under Section 80 EEA.
- However, before applying for a joint home loan, it is important to pay attention to its shortcomings. These include.
joint accountability
In case of joint home loan, both the candidates have equal responsibility for repaying the home loan. But if for some reason a candidate is unable to make the payment for the loan, the loan granting bank recovers the remaining amount from both the parties.
Impact on credit score
- If one of the applicants misses paying the EMI, it will have a negative impact on the credit scores of both of you.
- Repaying the loan is equal responsibility of both, hence information about late payment or default will be visible in the credit report of both.
- Due to low credit score, you may have to struggle to get a loan or credit card in future.
- Apart from this, due to low credit score, you will get loan at higher interest rate in future, which will increase the cost of the loan.
Difficult to sell your share
Selling your share in the joint property may be difficult if your joint home loan has not been extinguished. First of all, you have to find a buyer who is ready to buy only your share in the property. Most buyers want to purchase the entire property.