25 MAY, 2021

Purchasing a house is one of the biggest milestones in a person’s life. It not only holds an emotional value but also is a huge financial decision. Since the real estate prices have skyrocketed in recent times, a large number of people rely on home loans to finance the purchase of their first home. However, before you go ahead and avail a home loan, it’s advisable to consider every small detail that can make your home purchase a smoother ride.

According to experts, there are multiple benefits of having a co-applicant while buying a home. Any immediate family member (salaried or self-employed) can be a co-applicant. In case you are married, adding your spouse as a co-applicant on home loan can help you reap several financial benefits. Let’s have a closer look at some of them:

  • Improves Loan Eligibility
    One of the biggest advantages of adding a co-applicant is that it improves your loan eligibility. Since the bank will look at the combined income of the applicants while assessing the repayment capacity, the probability of the loan being sanctioned increases. You can also avail a comparatively higher loan amount if you add your spouse as a co-applicant while buying the house.
  • Ease of Repayment
    By adding a co-applicant, the repayment of the home loan becomes a shared responsibility, and this reduces the debt burden significantly. If two people are repaying the EMIs, it is possible to close the home loan faster in a much easier way. Also, in case of joint-ownership, you can consider paying a larger amount as down payment. This will reduce the home loan amount and make repayment easier.
  • Stamp Duty
    The stamp duty for men and women is different in most of the Indian states. Women are generally required to pay a lesser stamp duty as compared to men. For instance, in New Delhi, women are required to pay 4% stamp duty, while men must pay 6%. Therefore, adding your spouse’s name as the first owner of the property will help you save on the stamp duty, which is a sizeable amount.

  • Tax Benefits
    You can avail double tax benefits by availing a joint home loan, provided both the entities or individuals are the co-owners of the property. Claiming deductions from your taxable income under the Income Tax Act, 1961 can help you save significantly on taxes. As per the rules, under section 80C, the applicant can claim an income deduction for the principal repayment of up to Rs 1.5 lakh in a year. Similarly, interest paid up to Rs 2 lakh can also be claimed as a deduction from the taxable income under Section 24(b) of the Income Tax Act. This could lead to a significant tax saving for an individual. The best part is both the applicants can take this benefit of income reduction individually. That is, both the co-applicants can claim a deduction of up to Rs 3.5 lakh from their taxable income during tax calculation depending on their share in the property. 

  • Succession of the Property
    In the case of single ownership, succession of the property can be a tedious and time-consuming process. On the other hand, in a joint ownership, the co-owner won’t have much problem in claiming the rights of the property in case of the partner’s unfortunate and untimely demise.

    Now that you have a fair understanding of the various financial benefits of adding a co-applicant, ensure to make the most of it while availing a home loan. You must compare various joint home loan offers provided by different banks before making the final decision. This will help you settle for a home loan that best suits your needs.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.