Setting couple goals is a great way to travel on the journey of life together. Today, with both spouses having their own careers, their finances are more or less independent of each other. Within these parameters, couples usually come to an agreement on joint and individual savings and expenditure. These negotiated settlements can be dynamic, as when either of them needs to take time out from work to study, have a baby or due to health reasons.
One of the major joint decisions that you and your spouse would take is to purchase or build your own home. This is no doubt exciting, and the earlier you embark on this, the more advantageous it is.
You may not have the capacity to make the entire down payment individually. Another scenario would be if you’re unable to meet all the eligibility criteria on your own. You may wish to avail of a higher amount loan to build your dream home, with a lower property loan interest rate. In all these cases, the solution is to take a joint home loan.
You can take a joint home loan with any other person such as a spouse, parents, siblings, or adult children (unmarried female child).
What Are Joint Loans With Spouse?
This is a loan that you take along with your spouse which entails equal financial responsibility to both. In fact, many banks insist on having a co-applicant for home loans. In such cases, some banks also insist that the co-applicant becomes the co-owner, and if there is a joint owner to the property, that person also has to become a co-applicant for the loan, but this is not a mandatory condition in other banks.
From the lender’s point of view, a joint loan is a more attractive proposition, because the risk is shared. Taking an individual loan can put more pressure on the borrower, and there are chances that they may be unable to fulfill their obligations. Home loan rates have also increased in recent years. The chances of approval and swift processing are higher in the case of joint loans. There are also good benefits in this scenario.
Advantages of Joint Home Loan
Scale Up Your Dream: Property rates in the major metros have spiraled upwards in recent years, making it difficult for the average salary earner to purchase the home of their choice. Buying a home is a major investment. If either spouse is not eligible, and the loan amount is insufficient, it makes sense to apply jointly. This way you can certainly afford to buy a larger home, in a better location. Banks calculate the joint income to sanction a higher loan. This could be based on the designation of the borrowers, and the reputation of the organizations where they work.
Increase Eligibility: The spouses can bridge any gaps in eligibility regarding income, credit score etc. so that your loan application goes through smoothly. Your current salary could be insufficient to meet the criteria, and in this case, a joint loan is the perfect solution.
Tax Savings: When you take a home loan for a self-occupied property, it comes with a range of tax benefits. Under Sections 80C and Section 24 of the Income Tax Act, there are tax savings on repayment of principal amount and deductions. Both spouses can claim these benefits individually.
Lower Registration Fee: Some states offer lower registration fees and stamp duty for jointly owned properties.
Lower interest rates for women borrowers: Several banks and other lenders offer lower interest rates on home loan for women. This helps to scale down the EMI, and hence reducing the burden during the loan tenure. The stamp duty is also lower for women, there are improved chances of loan approval. Some banks may also lower the processing fees for women during festive seasons or during a sales campaign.
More Comfortable: Having a joint borrower to share the burden makes a huge difference to your peace of mind. The stress factor involved in making the monthly EMIs gets spread between both borrowers. You can also close the loan in a shorter tenure. In case of married couples, the loan tenure can be extended to up to 20 years if you so wish, restricted to the retirement age of the older spouse.
Repayment: Either spouse can make the EMI payments, or they can create a joint account from which to make the payments. This is based on your individual preferences.
On The Flip Side
Changed Status: In case of death, disability or divorce, the entire burden of repayment could fall on the other co-borrower. In case of a dispute, the responsibility falls on one person.
Financial Crisis: In case one of the borrowers loses their job, or falls seriously ill, they will be unable to make the EMI payments. In this case, the other partner’s income may be insufficient to cover the repayment.
Co-Ownership: When applying for the loan, both parties may need to sign as co-owners of the property. This could become an issue in case of divorce or death where you won’t have individual claim over the property. If you divorce, then you need signatures of both parties when you want to sell the property. Legal disputes can last for years, leading to greater delays and penalties.
Credit scores: In case the EMIs are being paid jointly, if one fails to make the payment, credit scores of both get impacted.