Pros and Cons of Taking Joint Home Loans

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09 JUNE, 2021

A joint home loan is a home loan taken by more than one person and repaid with shared financial responsibility. The co-applicants for the joint home can be family members, including parents, spouses, or adult children. Availing a joint home loan has its own pros and cons, which are enlisted below:

Pros of a Joint Home Loan

Higher loan eligibility
You can increase your home loan eligibility by adding a salaried or self-employed family member as a co-applicant. Thus, you can avail a higher loan amount as lenders may consider you a low-risk borrower due to your increased repayment capacity.
Lower interest rates
Since the monthly income and repayment capacity increases in case of a joint home loan, you can negotiate with the lender to reduce the home loan interest rate. Additionally, some banks offer lower interest rates to women borrowers if they are a co-owner of the property.
Repayment flexibility
While making repayment of a joint home loan, it’s not mandatory for both the co-applicants to contribute equally towards the repayment amount. This provides flexibility in loan repayment as both the applicants can mutually decide on their contribution towards loan repayment.
Tax benefits

Both the applicants can enjoy tax benefits:

Under Section 80C of the Income Tax Act, 1961, borrowers are eligible for a deduction of up to Rs 1.5 lakh on the principal amount separately.
Under Section 24 of the Income Tax Act, 1961, both the applicants can avail a deduction of up to Rs 2 lakh on the interest paid.

Cons of a Joint Home Loan

Time-consuming process
Availing a joint home loan can be slightly time-consuming. This is because lenders are required to check the credit report, documents, income, etc. of both the applicants. Loan approval and disbursal can take slightly longer in case of a joint home loan.
Impact on credit score
Failure to make timely repayment of the home loan affects the credit score of both the applicants. This can make it difficult for both the applicants to avail a loan in the future.
Divorce cases/untimely death
In case husband and wife have taken a joint home loan, and there is a divorce between the two, the loan repayment becomes a matter of concern. If one of the applicants stops paying EMIs after divorce, the entire burden of loan repayment may fall on the other applicant. In case of a default, both the applicants may have to bear legal consequences. Similarly, if there’s an untimely death of one of the applicants, the surviving applicant has to repay the loan amount.

It’s essential that you learn about the pros and cons of a joint home loan before going ahead with it. If you wish to purchase a bigger house, you will need a significantly large amount. That’s where a joint home loan can prove to be extremely helpful. Both the co-applicants should be well versed with the terms and conditions of the joint home loan to avoid any inconvenience at a later stage.

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.

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