Subsidies under the PMAY program are adding to the post-pandemic surge in house purchasing sentiment. In light of competitive developer pricing and favorable home loan rates, the decision to buy a house today becomes more reasonable. In light of this, it is critical to understand whether to apply for a house loan as a co-applicant or as a single applicant.
Co-applicant
A co-applicant is someone who, along with the principal applicant, is responsible for the house loan. Lenders typically favor the existence of a co-applicant because if the primary applicant is unable to repay the loan, the responsibility passes to the co-applicant.
From the perspective of a borrower, applying with a co-applicant can speed up the loan approval process and result in better loan conditions. Some lenders would even accept up to six co-applicants for a loan. Lenders like specific types of applicant ties. Father and son, unmarried daughter and father, unmarried daughter and mother, brothers, and husband and wife are among them.
Advantages of having a co-applicant:
Increased loan eligibility– Borrowers sometimes struggle to be accepted for a home loan because they do not satisfy the eligibility requirements. These factors include minimum income, credit score, debt-to-income ratio, and so on. Adding a creditworthy co-applicant with a strong credit score can increase such borrowers’ eligibility, even allowing them to acquire a larger loan.
Benefits for female co-owners – A female co-applicant is eligible for lower interest rates. These interest rates are usually lower than the normal rates offered by the majority of lenders. To be eligible for these benefits, the co-applicant must be the owner or part-owner of the property in question. She must also be a co-applicant or the loan’s principal applicant.
Tax advantages – Borrowers on house loans might benefit from tax breaks under Sections 80C and 24b of the Income Tax Act. Section 24b allows co-owners who are also loan co-applicants to deduct up to Rs 2,000,000 in interest on their house loan each year. Co-applicants can benefit from these tax breaks separately if they are also co-owners of the property in issue.
Disadvantages of having a co-applicant:
Co-applicant’s deaths or separation – If an applicant dies, the surviving applicant may not be entitled to the whole part of the property. If the applicant dies without a valid will, the property may be divided among the co-applicant and the deceased’s family. If a co-applicant refuses to repay the house loan during a divorce, the onus of repayment rests on the other applicant.
Credit ratings and future eligibility – Another consideration for borrowers is that if a co-applicant fails to pay their EMI, the credit scores of all applicants involved would suffer equally.
For the lender to approve their application for a house loan, the co-applicant must have the same creditworthiness as the Co-applicant. Going over all of these issues will help you make an informed decision as you take the important step toward purchasing your dream house.
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