Loans
Who can be your Co-Applicant in Home Loan?
4 min read
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Sep 24, 2024
Date: 24th August 2024 | Read time: 3.5 Minutes
While applying for a home loan, you might want to add one more person to your application to increase your eligibility to get approval for the home loan or simply to share the financial burden. But who all come under the category of co-applicants, and what does having a co-applicant imply? Here's an all-inclusive guide on home loan co-applicants, including eligibility criteria, benefits, and rights.
Who is a Co-applicant in a Home Loan?
A co-applicant is a person who applies for a home loan along with the borrower. Both the borrower and the co-applicant share the liability of repayment of the loan. In cases of co-applicants, the lender considers the co-applicant's income, credit history, and financial stability in addition to that of the primary borrower while evaluating the loan application.
The co-applicant does not simply play the role of facilitating loan approval. They also have a joint obligation concerning loan repayment and can avail the benefits of tax deduction and others applicable to home loans.
Who Can Be Co-Applicant for a Home Loan?
1. Spouse
Spouse is the most common co-applicant for a home loan. The incomes of both partners are added up, thus improving the prospect of getting a higher loan amount and also enhancing the chances of loan sanction. Also, a spouse as co-applicant helps in availing the co-applicant home loan tax benefits like claiming deduction against home loan interest Section 24(b) of the Income Tax Act.
2. Parents
Parents can also be the co-applicants for a home loan. This will help if the income of the parents comes into the household or they support the borrower financially. This helps especially in the case of younger borrowers who may not have enough income coming in, or their credit history might not be good enough.
3. Siblings
Siblings: Siblings can also be co-applicants if they are gainfully employed and their income applies to the loan application. A sibling can be included mainly in cases when siblings purchase property together or invest jointly.
4. Children
In some cases and more so if one's children are independent and earn sufficiently, then one's children can be co-applicants. It all depends upon the fact whether the property is for investment jointly or for family use. More often, it is the case in joint purchases of property or as family use.
5. Other Relatives or Friends
Though less common, other relatives or friends may also be co-applicants if they meet the lender's eligibility criteria. In most cases, their inclusion depends on their financial status and relationship with the main borrower.
Home Loan at AU Small Finance Bank
AU Small Finance Bank has multiple variants for home loans, which can be tailor-made to suit various requirements, even if there are co-applicants. In fact, if the application for home loan is in co-applicant status with AU Small Finance Bank, then the eligibility increases and one might get better terms. The bank will assess the financial profile of both the primary borrower and the co-applicant, their credit score, income, and existing liabilities, to arrive at the amount of loan and the terms.
Right of Co-Applicant in Home Loan
Co-applicant enjoys several rights:
1. Equal Responsibility
The co-applicant and the main borrower are equally liable to return the loan amount. Thus, any delinquency or defaults will affect the credit history of both the co-applicants and main borrowers.
2. Tax Benefits
Co-applicants can claim tax benefits jointly under Sec 24(b) for interest payments and Sec 80C for principal repayments provided the co-applicants pay the EMI.
3. Ownership Rights
In some instances, the co-applicant may even be legally entitled with ownership rights to the house. This, in most instances, applies if they are listed as co-owners of the property documents.
Also Read: [Exploring Different Types of Home Loans: Variety in Home Finance]
Co-Applicant CIBIL Score for Home Loan
The CIBIL score of a co-applicant is very important in the home loan approval process. A higher CIBIL score can definitely help the overall loan application because it reflects the creditworthiness and financial reliability of the co-applicant. The credit scores of both the primary borrower and co-applicant are taken into account during the determination of the interest rate, loan amount, and terms of the loan.Conclusion
A co-applicant will bring added advantages to your home loan application, ranging from increasing eligibility for a better loan amount to sharing the financial burden. However, it is very important to select a co-applicant whose financial stability and creditworthiness align with your requirements for the loan. The various roles, benefits, and rights of a co-applicant will help you in making informed decisions and maximize the benefits arising from your home loan.
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