Friday, 19 December 2014

What are the Terms and Conditions While Adding Co-applicants in a Home Loan

Terms and Conditions While Adding Co-applicants in a Home Loan:

While applying for the home loan, you always have the option of adding another borrower or a co-applicant or a joint applicant. A co-applicant is a person who applies for a loan along with the main borrower.

Adding a co-applicant can be beneficial if you want to increase your home loan eligibility. A co-applicant’s income will also be considered as a determining factor for Home Loan Eligibility Calculator.
However, not everyone can be a co-applicant in a loan and banks specify some conditions for a person or an entity to be added as a co-applicant to the loan application.
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Below are some of the points to take care while adding a co-applicant:-
1. Spouses (husband and wife)
It is very common to have spouses as co-applicants in a home loan calculator and this helps in many ways. In case both are earning, their combined income can be used for calculating eligibility. Secondly, both can claim tax benefits in proportion of the EMI they pay and increase their combined tax benefit.
2. Siblings:
Two brothers can be joint applicants in a loan for the same property if they stay together. However, typically a brother and a married sister cannot be co-applicants in a home loan in most banks.
3. Father and Son:
Father and son can be co-applicants in a home loan with each other even if the property is owned by only one of them.  Incomes of both father and son can be considered for determining eligibility. However, in this case, loan tenure may have to be restricted based upon the father’s age.
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4. Business Partners:
Two or more people unrelated by blood but partners in the same business entity (or controlling shareholders and directors in the same company) can act as co-applicants with each other for a loan. The income of the partnership or company they jointly own can be added to their individual incomes to arrive at eligibility. This is however subject to the condition that they co-own the property.
Note that distant relatives, friends and unrelated persons or entities cannot be added as co-applicants. 

Documentation for co-applicant:
A joint applicant or a co applicant is equally liable for the loan as the main applicant. Accordingly, same set of documents (KYC, income) are required for a co-applicant as for an applicant.
Impact on CIBIL:
Note that the co-applicants’ CIBIL Score and CIBIL Record will reflect all loans in which he/ she is an applicant or a co-applicant irrespective of who pays the EMI

These are some of the terms and condition that you need to take care while adding a co-applicant when you apply for home loan. If you have any other questions related to home loan, you can tell us via comment section.