Purchasing your dream home can be simplified with the right financing, such as a Home Loan. With a Home Loan, you can access a sizeable loan amount at a competitive interest rate, provided you meet the loan eligibility criteria and have a strong financial profile. To increase your eligibility for a Home Loan, you can include a financial co-applicant in your loan application.
In this article, we discuss who can be a co-applicant and the advantages of adding one.
Financial Co-Applicant in a Home Loan
A financial co-applicant is an individual who applies for a Home Loan jointly with the primary borrower. Co-applicants share the responsibility of repaying the loan. Adding a financial co-applicant can improve your chances of securing a Home Loan.
You can include immediate family members as co-applicants, such as parents, spouses, siblings, or children. However, there are some exceptions, such as married daughters.
Advantages of Adding a Financial Co-Applicant
- Increased Eligibility
When you apply for a Home Loan with a financial co-applicant, the combined income of both applicants is considered. This can increase your loan eligibility, enabling you to apply for a higher loan amount. - Tax Benefits
Under the Income Tax Act, 1961, both the primary borrower and co-applicant can avail of tax benefits on the principal repayment and the interest paid on a Home Loan. To qualify for these benefits, the co-applicant must be a co-owner of the property. - Favourable Loan Terms
Having a co-applicant with a strong financial profile can help in securing a Home Loan on favorable terms, such as a competitive interest rate or a longer repayment tenure.
Things to Consider When Adding a Financial Co-Applicant
Before you add a financial co-applicant to your Home Loan application, consider the following:
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Credit Score:
Ensure the co-applicant has a good credit score, as this will positively impact the loan application. However, note that since the co-applicant shares equal responsibility for repaying the loan, any default can affect the credit scores of both applicants. -
Co-Ownership:
To claim tax benefits on a Home Loan, the co-applicant must also be a co-owner of the property you wish to purchase. -
Documentation:
Both applicants need to submit proof of identity, income, and property ownership details, among other documents.
Also Read: Impact of Co-Applicant’s CIBIL Score on Your Home Loan
Conclusion
Adding a financial co-applicant to your Home Loan application can increase your eligibility and make the repayment process manageable. By leveraging the combined income and credit strength of both applicants, you can secure a loan that meets your financial requirements. However, it is important to carefully consider the responsibilities and eligibility requirements before adding a co-applicant.
