What Are The Liabilities Of A Co-Home Loan Applicant In A Home Loan
The increased property prices have meant that in today’s world you just cannot do without home loan. An average cost of a decent apartment in the metro cities is approximately 1 crore rupees, while in tier 2 and tier 3 towns it could be anywhere in the range of 40 to 70 lakh rupees. Hence, most people prefer to have their husband or wife as co-applicant and opt for home loan in joint names to increase the home loan eligibility. You can simply add the co-applicant while you apply for a home loan online. Along with the higher loan amount, having a co-home loan applicant also has other benefits in the form of income tax rebate for both co-owners for the repayment of principal amount under section 80C and the interest repaid under section 24. However, both co-borrowers should be co-owners of the apartment in order to avail tax benefits under the Income Tax Act.Along with these advantages, being a co-home loan applicant also comes with its own share of liabilities and you must wisely examine these before taking a joint home loan.
Repayment of home loan is a joint responsibility of both co-borrowers
In case of joint home loans, the liabilities ofco-home loan applicants are equal and all terms and conditions of loan are binding on both the borrowers. Hence, if anything goes wrong and either of the spouses passes away or in case of a divorce, it becomes the responsibility of the co-borrower to repay the complete loan. And this could badly impact the day to day finances. Even if both parties decide to separate mutually and want to convert the home loan from joint to single the bank or financial institute may not allow doing so in case the income does not meet the eligibility criteria solely. They may ask for an alternate co-applicant.
Repayment record directly impacts the credit score of co-home loan applicant
If for any reason the repayment record gets affected and the equated monthly installments (EMIs) are not serviced on time, it will directly impact the credit score of all co-applicants. This proves to be a deterrent in the long run as it becomes difficult to get the loans in future.
The lender can initiate legal action in case of non-repayment of loan
The troubles just don’t end with the bad credit score. The lenders can also initiate legal proceedings against all co-applicants. The troubles multiply if you are staying in the property for which you have taken a joint home loan and it is your only shelter.
Conclusion – Taking a home loan in joint name, no doubt has several benefits, however, all liabilities and the troubles associated with it must be judiciously weighed. The best way out is to take a life insurance exceeding the joint home loan amount individually for all applicants.You must also chart out a financial plan and should wisely adhere to it. In addition to this, you must make sure thatat no point of time, the sum of all your EMIs exceeds40 to 50 percent of the net monthly income and you must also save regularly to meet any unforeseen financial troubles.