Home Loan: Is taking a joint home loan a bad option?

Buying your own home is one of the biggest and most important milestones in a person's life and it indeed requires a lot of financial effort. Many are opting for home loans to acquire a new house or buy their first residential property. Home loans often involve a huge amount and the repayment tenure spans over from 20-30 years. So, it needs meticulous planning before availing a home loan.

Home loans availed by a single member of the family could be a burden and this is when having a co-borrower can help. Families with two or more earning members can easily choose a joint home loan as it reduces the burden on a single person and also helps in increasing the loan amount. However, it also comes with a set of advantages and risks. 

The borrowers should go through the benefits and risks of a joint home loan before finalising a loan offer.  

Benefits of Joint Home Loan

Increased loan amount: Adding a co-borrower in the application also increases the eligibility to borrow more funds from banks, provided both borrowers easily meet the basic requirements.  

Higher chances of loan approval: With a co-borrower who has a good credit score also improves the chance of getting the home loan application approved. 

Tax benefits: With a joint home loan, each co-borrower becomes eligible to benefit individually from the available tax deductions including Under Section 24 and Section 80C of the Income Tax Act, 1961. 

Reduced Interest Rate: Having your wife or mother as a co-application in the application can help in the reduction of interest rates. This is because the majority of banks offer reduced interest rates to female customers. 

Risks of Joint Home Loan

Credit Score: Just a high credit score can benefit in a joint loan application, it can also increase the chances of the application getting rejected. This happens when any of the co-borrowers has a lower credit score or a bad history of loan/EMI repayment. 

Financial pressure: In cases when one of the borrowers faces a financial crisis or major loss, the other borrower automatically becomes liable to repay the entire loan amount. This increases the financial pressure on one borrower.  

Chances of dispute: In case of future disputes between the co-borrowers, selling the property acquired through the joint loan becomes difficult. 

Is it bad to take a joint home loan?

While there are some significant points that need to be considered before applying for a joint home loan, it can be beneficial if the co-borrowers understand all the terms and remain in agreement for the entire repayment period.