It isn’t necessary that a home loan is taken only in the name of a single person. Banks provide the facility of including a co-applicant in the loan agreement. One can name their spouse, parents, children, or siblings as co-applicants.
The buyer’s spouse can be named as a co-applicant even if she isn’t a co-owner of the house. While the proof of ownership needs to be produced in case the parents, child or siblings can be added as co-applicants in the agreement. It has the following benefits:
Merits of having Co-Applicants in Home Loans
Higher Loan Amount:
In the case of a single applicant, the personal income and assets of the individual are evaluated by the bank. It is done to ensure that the bank lends the amount of money that they believe is recoverable with the addition of interest.
More sensible to add a co-applicant as in that case the income and assets of all the applicants are considered, from the borrower’s perspective he will be able to borrow a much higher amount.
Ease the burden of loan repayment:
It eases the burden of paying EMI’s significantly. The banks provide a system of payments where the total amount can be split among the applicants. The division has to be chosen relating to the payments in the starting.
As per the Indian Income Tax Act, there are tax benefits on repayment of the principal amount as well as the interest. The biggest advantage is that all co-applicants can claim tax benefits individually under Section 80C. The allowable deduction is Rs. 1, 50,000/- on interest repayment and up to Rs. 1, 00,000/- on principal repayment.