When you apply for a home loan, lenders consider your income, credit score, and repayment capacity. But sometimes, your eligibility might fall short of the desired loan amount. That is where having a co-applicant becomes useful. A co-applicant can significantly improve your home loan eligibility while also offering financial and tax-related benefits.
Let us understand the complete picture — from co-applicant meaning, eligibility, tax benefits, to responsibilities — to enable you to make a well-informed decision to buy a home.
What is a Co-Applicant in a Home Loan?
What is a co-applicant in a loan? A co-applicant is someone who applies for the home loan together with the main borrower. The co-applicant has the same legal and financial liability for repayment of the loan.
The co-applicant in a loan situation quite often occurs when the main borrower needs to increase their home loan eligibility or simply wishes to divide the repayment stress. Significantly, lenders also often ask for the co-applicant to be a close relative.
In easy language, co-applicant refers to someone who finances together with you on a home loan and executes the same loan document.
Who Can Be a Co-Applicant?
When a co-applicant is being considered, banks and housing finance institutions such as Grihum Housing Finance permit only some relationships:
- Spouse - The most widely practised and preferred co-applicant because they share income and responsibility.
- Parents - Particularly when the house is being bought together or in the parents' name.
- Siblings - Permitted under certain conditions, and typically if both are joint owners.
- Children - If they are majors and have a fixed income.
Non-relatives like friends or business associates are usually not acceptable as co-applicants.
Also Read: How to Get a Home Loan with Zero Credit History?
Advantages of Having a Co-Applicant
Selecting a co-applicant for your home loan has several financial and practical benefits:
- Increased Loan Eligibility: The lender consolidates both applicants' incomes, making you eligible for home loan amounts that would otherwise be beyond your reach on one income.
- Shared EMI Burden: : Both co-owners repay, and the monthly installments are easier to bear.
- Tax Benefits: As both applicants are co-owners and paying EMIs, they are eligible to claim tax deductions under Section 80C (maximum of ₹1.5 lakh on principal repayment) and Section 24b (maximum of ₹2 lakh on interest paid).
- Faster Approval: Two incomes and improved financial profiles give the lender greater confidence and usually result in faster approval.
These are some of the most valued advantages of a home loan when availed together.
Financial Responsibility of Co-Applicants
Perhaps the most significant point to know is that co-applicant in a loan translates into collective liability. The principal borrower and the co-applicant will be jointly liable for repayment of the loan.
If one of them defaults on payment, both credit reports will be affected. Upon default, lenders will recover from both the individuals. So prior to adding someone as a co-applicant, have financial mutual understanding and trust.
Documents Required for Co-Applicants
While applying together, every co-applicant has to provide the following documents:
- Identity proof (Aadhaar card, passport, voter ID)
- Address proof
- PAN card
- Income documents (salary slips, bank statements, Form 16, ITRs)
- Employment evidence (offer letter, company ID, employment agreement)
These documents assist the lender to assess the credit history and stability of the income of both applicants.
Tax Relief to Co-Applicants
One of the biggest advantages of having a co-applicant is the tax relief. But there are some prerequisites:
- Both must be co-owners of the property.
- Both should make part repayment towards the loan.
- If these requirements are fulfilled:
- Both co-applicants can avail a maximum of ₹1.5 lakh under Section 80C for repayment of principal.
- Both can also claim up to ₹2 lakh under Section 24b for interest paid.
So, is co applicant eligible for tax benefit on home loan? Yes, but only if both repayment and ownership terms are met.
Considerations Before Adding a Co-Applicant
While co-applicant home loans are advantageous, it is wise to consider the following points:
- Trust and Transparency: Maintain open communication regarding responsibilities and finances.
- Credit Score: The credit score of the co-applicant has a direct influence on the loan approval and conditions.
- Legal Ownership: Preferably, the co-applicant would be a co-owner. Otherwise, tax relief may not be available.
- Future Liability: In case of death or disagreement, the co-applicant remains liable for the loan.
Also, note the drawbacks of a co-applicant home loan. For example, differences of opinion in repayment may create strained relationships or legal issues.
Also Read: Understanding ROI on Home Loans: What It Means and How to Calculate It
Co-Applicants with Grihum Housing Finance
We at Grihum Housing Finance are here to support co-applicant home loan flexibility as per your requirement. Whether you are a salaried individual, a self-employed professional, or a parent-child team, we guide you through the home loan process comfortably. Our skilled professionals assist you in choosing the correct co-applicant structure, maximizing both eligibility and tax efficiency.
Conclusion
In conclusion, including a co-applicant at the time of applying for a home loan can go a long way in enhancing the chances of your loan getting approved as well as making the financial ride easier. It is nevertheless important to comprehend the co-applicant's meaning in the loan, the guidelines of eligibility, repayment duty, and taxes
With careful planning and the appropriate co-applicant, you can reap the maximum benefits of a home loan while creating a secure future. Prior to going ahead, weigh all advantages and disadvantages carefully to ascertain that a joint loan is the appropriate action for your dream house.
