Home loan applications have been growing in India, with the financial year 2017-18 recording an approximate growth of 16%. This rate grew in the following year 2018-19, recording almost 19% growth in home loan applications, consequently suggesting remarkable stability in the housing sector. Understandably, with more and more Indians opting to build their houses, it is also vital that they learn how to minimise their repayment burden.
A convenient option in this regard is that of availing a joint housing loan. Borrowers can easily borrow from a financial institution jointly with their spouse or a close family member to avail multiple benefits. Discussed below in detail, these benefits do not just help in reducing the financial burden of repayment but also offer a few additional advantages.
- Tax benefits
Various tax benefits on joint housing loans are offered by the Income Tax Department of India, thereby reducing borrowers’ stress over its repayment. These are explained under the following sections of this Act:
- Section 80C: This section allows borrowers of housing loans to avail a tax exemption on their principal amount. They can avail this exemption up to a maximum of Rs.1.5 lakh. While both borrowers can avail of this benefit, it can be availed only once.
- Section 24b: Under this section of the Income Tax Act, home loan borrowers can avail exemptions on their interest repayment. Both borrowers can avail this benefit up to a sum of Rs.2 lakh. Notably, borrowers must complete the construction of their house within 5 years to avail of this benefit, or this maximum exemption amount comes down to Rs.30,000.
- Higher chance of approval
Generally, borrowers have a better chance of approval on their housing loan applications if two individuals apply for it jointly. With financial institutions facing a lesser risk of default due to the involvement of two borrowers, typically lower home loan interest rates are also offered on such applications. Additionally, a potential borrower with low CIBIL score can also avail home loans if his/her co-applicant has a good score.
- Higher LTV
Usually, housing loans are high-value financing options, which include a loan to value ratio. This ratio, ranging between 60% and 90% of a property’s value, is the total amount of money disbursed by a financial institution to a borrower. While learning all about joint housing loans, borrowers must note that joint applications tend to offer a higher LTV since there is a lesser chance of default on such approvals. This effectively allows its borrowers to spend a lesser amount from their pockets.
- Easier repayment
A major convenience of availing a joint housing loan is that of lesser repayment burden on its borrowers. With its EMI amount distributed between two borrowers, neither has to carry a heavy financial burden. Additionally, they can also choose to opt for a lower tenor of repayment, thereby reducing the applicable rate of interest on their loan scheme, further reducing their financial burden.
When a borrower has decided to avail a home loan jointly with another individual, he/she should begin by checking eligibility. This can be done easily with the help of a home loan eligibility calculator, an easily available online device offered by various financial institutions.
Once confirmed of their eligibility, borrowers can easily apply for their housing loan along with all the necessary documents. Typically, financial institutions provide pre-approved offers, which make home loan applications convenient and prompt. Such offers are provided on various financial products, including home loans, loan against properties, business loans, etc. You can easily check your pre-approved offer by providing your name and phone number.
It is also advisable for borrowers to use an EMI calculator before their application to check their total repayment amount, as well as the monthly instalments. Moreover, provided by various financial institutions as an online tool, these calculators require total loan amount, interest rate and tenor duration for their EMI calculation. Among various benefits of calculating EMIs before taking a home loan, the most vital advantage is that of planning a loan repayment beforehand, to avoid any risk of late instalment or default.
Also Read: 4 Reasons Why a Joint Housing Loan Can be Important