If you have a dream of purchasing a home, but are worried about the Home Loan Amount, bank is going to sanction against your current income, relax… take a deep breathe and calm down. Usually, Banks do not allow a person to borrow to an extent where their monthly EMI(Equated Monthly Installments) payment exceeds more than 40-50% of their monthly income. If you are in a similar situation and your current income is not high enough to ensure the Required Home Loan Amount, there is a smart option that you can exercise. You can (and in fact should) go for a Joint Home Loan with your parents or spouse as co-borrower(s) of the property. With co-borrowers/co-applicants around, for Loan-Amount-Calculations, Bank will take into account the income of all the applicants involved. Some banks even allow siblings as co-borrowers, so you may have to check with your bank, if you can have your brother as co-borrower.
But before you jump to a decision of taking Join Home Loan, it is certainly advisable to be aware of the Pros and Cons of taking a Joint Home Loan.
- If you need a higher loan amount but your salary is not enough to get required loan amount, Joint Home Loans is the way for you.
- All co-applicants are eligible for getting tax rebates under Section 80 C for principal repayment(Subjected to a Maximum Amount of Rs 1 Lakh) and under Section 24 for Interest Repayment(Subjected to a Maximum Amount of Rs 1.5 Lakhs). So if a couple is taking a Joint Home Loan, in theory they could collectively claim Tax Exemptions under Section 80 C for Principal Payment of Rs 2 Lakhs and under Section 24 for Interest Payment of Rs 3 lakhs. Though the Actual Tax Exemption depends solely on the Monthly EMI being paid.
- Both the owners would have to show the Rental Income in Proportion of their ownership. So if your brother has a 40% stake in the house and you have 60%, for tax purposes, 40% of rental income from the house will be added to your brothers’ annual income for that financial year, while you will be responsible for rest 60% amount.
- In case of any dispute arising between the borrowers/owners, it could create problems, so you want to play safe, especially with your wife 😉 you should not go for it.
Apart from these, there are some important points which you need to keep in mind, before taking Joint Home Loans:
- You should be a co-owner to enjoy tax benefits of a Joint Home Loan
- A maximum of 6 co-applicants are allowed to be part of a Joint Home Loan.
- You should be a co-applicant of the home loan to get tax benefits out of it.
- Tax Benefit to individual borrowers is available in proportion of the EMI paid by them. Say for example, you are paying 70% of the EMI and your wife is paying rest 30% , you will be able to claim tax-exemption only on your 70% payment. Similarly, your wife can also enjoy tax-benefits on her 30% payment.
So enjoy your dream house with your spouse as a Joint-Owner as well as Joint-Borrower 🙂