December 2016 | Back to all Real Estate Articles
There are multiple benefits in terms of sharing the debt-burden and enhancing eligibility level
The home loan amount and interest rate on the loan for an individual depends on various factors like eligibility, tenure, availability of money in the market (liquidity), inflation and monetary policies. This makes it imperative for the borrower to be careful while opting for a home loan so as to ensure that the home loan does not turn out to be too expensive over the duration of the loan. In this context, the option of a joint home loan is worth considering as it will not only help the borrower in sharing his debtburden but will enhance his eligibility to get a higher loan as the income of the coborrower will be considered.
Usually lending institutions give an option to take a joint home loan with as many as six coapplicants this includes his/ her spouse as well as blood relatives like parents and siblings. A joint home loan however is not usually permitted to friends, sisters or unmarried partners living together though they could be the coowner of the property. Some banks and financial institutions also allow brothers to take a joint home loan provided both of them are coowners of the property. Spouses are however exempted from the property coownership clause and the term of their loan can be a maximum of 20 years, subject to the retirement age of the older applicant. In case the loan is availed by a parent and a child the maximum term is 10 years and if the parent's income is considered for repayment, then the maximum term may be restricted to the retirement age of the parent.
The documentation process for joint home loans is similar to that of individual home loans. Coapplicants are required to submit know-your-client (KYC) details such as identity and address proof, income proof and proof of coownership of the property.
From an income tax perspective, the provisions for tax benefits remain the same for both individual and joint home loans. However, the total benefits avail-able in absolute terms are higher in a joint loan as compared to an individual loan. In case of a joint home loan, both or all coborrowers (provided they are coowners except in case of spouse) can claim tax deductions under Section 24(b) of the Income Tax Act against interest repaid and under Section 80C against principal amount repaid depending on their ownership share. This is besides the option to split costs of registration and stamp duty between co-borrowers to claim tax benefits under Sec-tion 80C.
An individual can avail the tax benefit on a home loan up to Rs 1.5 lakh under Section 80C and 2 lakh under Section 24(b). But if he has availed a joint home loan in the ratio of 50: 50, then both the coborrowers can claim these benefits separately. This takes the combined limit to Its 3 latch under Section 80C and 4 lakh under Section 24(b) there by reducing the overall cost of loan for the family. The total tax deduction that could be available by a married couple taking a joint home loan is Its 7 lakh, which is extremely beneficial. This is double compared to an individual home loan, although this provision may vary from person to person. It is therefore advisable to mutually work out the ownership share between the coborrowers to optimize the tax benefits. This can be in the ratio of 50:50 for claiming deductions in equal proportion or in the ratio of 60:90 where the coborrower in the higher tax bracket owns a bigger share.
The repayment process for a joint home loan is simple and convenient. Payment can be made from a single or joint account by way of cheques or ECS. Coborrowers also have the option to share the number of EMIs between them, they could decide the number of cheques to be issued by one borrower and the balance could be made by the other. Another convenient mode is that the payment of all the instalments is made by one borrower followed by a refund of his share from the other borrower. For better loan eligibility, joint home loans are becoming a practical option for borrowers today especially when the coapplicant can contribute to the loan with their salary as well.