Co-Applicant: Meaning, Tax Benefits, Eligibility, & Responsibilities

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12 DECEMBER, 2023

In India, the aspiration to own a home is a significant life goal. Many commence financial planning early, aiming to achieve the dream of having their own house. Financial institutions support this endeavour, offering attractive Home Loans to hardworking individuals at favourable interest rates.

Nowadays, homeownership is possible, especially for those with good credit and financial stability. However, for those facing low credit scores, hope persists with applying for a Home Loan with a co-applicant, ensuring homeownership remains within reach.

What is a co-Applicant in Home Loan?

When it comes to Home Loans, a co-applicant is another borrower who applies for the loan alongside you. They enhance your loan eligibility and share the responsibility of loan repayment, potentially boosting your chances of loan approval. Co-applicants serve as valuable companions in securing your dream home.

Who Can Be a co-Applicant For Home Loan?

Selecting the right co-applicants for a Home Loan is essential. The most common co-applicant combination is spouses, leveraging both incomes for eligibility.

Another option is a father-son or brother-brother option, though approval depends on the bank's policies. An unmarried daughter can also co-apply with either or both parents, broadening the spectrum of co-applicant possibilities. Understanding these dynamics ensures a smoother Home Loan application process.

Co-Applicant Example

Relationship	Description
Spouses or Domestic Partners	Married couples or legally recognised domestic partners who apply together for a Home Loan.
Parents and Children	Parents can co-apply with their adult children and vice versa, combining incomes and credit scores.
Siblings	Brothers and sisters can co-apply for a Home Loan, with financial institutions assessing each applicant individually.

Benefits Of Having A Co-Applicant In Home Loan

Make your Home Loan journey smoother by exploring the benefits of having a co-applicant. It offers several advantages:

When both co-applicants have a good credit score and stable income, the likelihood of loan approval increases.
Financial institutions offer attractive Home Loan interest rates to co-applicants with financial stability and good credit scores.
The co-applicants, who are co-owners of the property, enjoy combined tax benefits.
Co-applying for a Home Loan increases the eligibility of both applicants.

The co-applicants need not always be co-owners of the property in the home-buying process. Furthermore, co-applicants are legally bound to repay the Home Loan if the principal borrower fails.

They say, “Share the burden, and it becomes easy to carry.” The same can also be said when it comes to Home Loans. With a co-borrower's help, Home Loan repayment becomes easier.

What Does The Co-Applicant Do? & Their Responsibilities

Sharing financial information
Repaying the loan in case of default
Maintaining a good credit score

The co-applicant in a Home Loan shares the responsibility of repaying the loan with the primary borrower. They are equally liable for the repayment of the loan amount. In addition, the co-applicant must also provide their financial information to the financial institution, which helps to enhance the eligibility for a Home Loan.

If the primary borrower defaults on the loan, the co-applicant is responsible for repaying the outstanding amount. Therefore, the co-applicant must maintain a good credit score and ensure timely repayment of the loan amount.

Co-Applicant Home Loan FAQs

1.)What is the role of a co-applicant in a Home Loan?

When applying for a Home Loan, a co-applicant refers to someone who applies with you as a joint loan amount borrower. Having a co-applicant on a Home Loan can improve your eligibility for the loan.

2.)Can a co-applicant apply for another Home Loan?

A co-applicant can apply for another Home Loan if they meet the eligibility criteria and can provide the required documentation to support the new loan application. However, it is essential to note having multiple loans may impact the creditworthiness and financial stability of the co-applicant.

3.)Is co-applicant mandatory for a Home Loan?

Although having a co-applicant is not mandatory for a Home Loan in India, it offers several advantages. One key benefit is it gives the financial institutions an added level of assurance about timely loan repayment as the responsibility is shared between two individuals. Additionally, having a co-applicant can increase your eligibility for a Home Loan.

4.)Can a co-applicant be added later to an existing Home Loan?

Banks have restricted the category of co-applicants to specific relationships. These relationships include husband and wife, father and son, brother and brother, mother and son, unmarried daughter and mother, and unmarried daughter and father.

5.)Can a co-applicant have a different address than the primary borrower?

A co-applicant can have a different address than the primary borrower while applying for a Home Loan. However, the financial institution may require the co-applicant to provide proof of their current address for documentation purposes. It is important to note the co-applicants income and creditworthiness will also be considered while evaluating the Home Loan application.

6.)Is it possible to take out a Home Loan without a co-applicant?

Yes, it is possible to secure a Home Loan without a co-applicant. However, having one can enhance eligibility and increase the likelihood of loan approval.

7.)Can a co-applicant claim tax benefits?

Yes, co-applicants can claim tax benefits on a Home Loan. Both primary and co-applicants enjoy deductions on the principal and interest repaid, subject to specified conditions.

8.)Can a co-applicant be removed?

Sometimes, a co-applicant can be removed from a Home Loan, but the process varies among banks.

9.)What are the rights of a co-applicant in a Home Loan?

A co-applicant in a Home Loan shares equal responsibility for repayment. They have the right to access loan details, monitor repayments, and enjoy tax benefits as per the loan agreement.

Co-Applicant: Meaning, Tax Benefits, Eligibility, & Responsibilities in Home Loans