Take a solidarity mortgage? Check its pros and cons first

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Buying a first home requires a lot of financial effort. You need money for the down payment even before applying for a home loan. Typically, when an individual lacks funds or is unable to meet the lender’s eligibility criteria on their own, one of the options that may come to mind is a joint home loan.

A person can strengthen their borrowing capacity while taking out a joint mortgage. Moreover, it becomes easy to borrow when a person’s credit rating is not enough to obtain the amount of money a borrower may need. Let’s look at the pros and cons of a joint home loan.

Who can apply?

You can jointly borrow a home loan with your family members or a close relative like parents, spouse, male child, unmarried female child or brothers living together. It is not compulsory to be a co-owner of the property. However, for the tax advantages, the co-borrower must also be the joint owner of the property in order to benefit from the applicable tax advantages.

Adhil Shetty, CEO of Bankbazaar.com, says, “A joint home loan improves your loan eligibility and provides tax benefits for all co-borrowers. It is necessary to ensure that you add a co-applicant based on their income, credit rating, and repayment capacity to service the loan to completion. You can take out a joint loan with your spouse, your parents and your child. Some banks may allow brothers to apply for a joint home loan if they are co-owners of the property. However, friends, sisters or unmarried couples living together may have difficulty obtaining credit. »

Read also: Interest rates on the rise? Step-by-step guide to getting the cheapest home loan

Advantages of taking out a joint mortgage

By adding a co-applicant to your home loan, you can increase your eligibility for more funds from banks, provided both borrowers meet the lender’s basic requirements. Failure to avail funds from financial institutions can be due to several reasons such as bad credit rating, insufficient income, among others. However, a co-applicant can fill gaps in your eligibility standards.

Adding a joint home loan borrower with adequate income or a high credit rating can improve your chances of getting the home loan approved quickly.

In a joint mortgage, if the co-borrower is also a co-owner of the property, he can also benefit from the advantages of the tax deduction u/s 24 and u/s 80 C within the prescribed limit. Joint borrowers can enjoy a tax benefit of Rs 1.5 lakh and Rs 2 lakh each, making a total benefit of Rs 7 lakh together as per the Income Tax Act.

Lenders prefer joint owners because it reduces their risk. A few banks offer home loans at a lower interest rate if one of the borrowers of the home loan is female, so you can lower the EMI of the home loan by including a female family member as a co-borrower. in the loan.

Disadvantages of taking out a joint home loan

All financial products have advantages and disadvantages. Similarly, a solidarity mortgage also has certain disadvantages. For example, if a co-borrower fails to repay the EMI home loan on time, the credit ratings of both borrowers are affected.

If there is a dispute between the co-borrowers, it may result in the non-payment of one of the borrowers and thus lead to a repayment default. If the loan was taken by the spouses together and later in the event of a divorce, it may result in a legal dispute which may take a long time to resolve.

Often a co-applicant is added to ease the financial pressure of the loan, but if they fail to repay the loan with you after years, the full loan amount becomes your responsibility.

Does it make sense to borrow jointly?

Selecting the right co-borrower is important to eliminate the risk of risking the entire loan. To avoid a loan dispute in a joint home loan, both co-borrowers should know the applicable terms and conditions. If you are going to become a co-borrower in a home loan without being one of the owners of the property, then make sure you know the repercussions if the co-borrower who is also the owner does not repay the loan. You must do all the calculations before entering into a loan agreement with the lender.

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