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.

Points to be Remember While Taking a Home Loan after 45

If your age is 45 years or more in age and are thinking of taking a home loan, chances are that you will need to go for shorter loan tenure up to 15 years as compared to younger home loan borrowers.  Say, you apply for a home loan at the age of 45 and your retirement age is 58 years, then the maximum tenure which the bank may be willing to give you will be 13 years. As the tenure is relatively shorter, your Home Loan Eligibility Calculator will be lower for the same EMI or you will have to shell out higher EMI compared to a 30 year old person availing same amount of home loan.

In recent past, increase in the salary levels has brought down the average starting age of most home loan borrowers. People now avail home loans in their late 20’s and early 30’s making it possible for banks to offer longer loan tenures up to even 30 years.

Now, if you happen to be taking a home loan in your 40’s, here are some important points that you need to know:

1. Do in-depth research: In today’s complex world, researching all the available Home Loan Calculator is very important, no matter what your age may be. However, when you make a new long term financial commitment at the age of 45, it becomes more important for you. This is because you also have many other expenses to take care of, such as children’s education, their marriage and your own retirement.

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2. Increase your down payment or own contribution: At the age of 45, you may have more savings than a 30 year old.  So, it may not be a bad idea for you to use your savings to make higher down payment, thereby opting for a lower loan amount. This will reduce your EMI and your interest outgo.

3. Choose the maximum possible loan tenure available: The loan tenure available to you will be maximum 15 years. So, try and avail that.  In case you have surplus money available, you can always prepay your home loan.

Mistakes to Avoid While Taking Home Loan

Taking any loan requires proper planning and in-depth analysis. In particular, when you take a home loan this becomes even more important because the commitment is for long term, typically 15 to 20 years. In case you happen to select the fake a wrong bank or an inappropriate loan product, you may end up in paying more money for your home loan that you should. Many a times, borrowers tend to hurry up with their home loan choice and end up committing to a costly deal that negatively impacts their future finances even though it looks good initially.

Below are some of the common mistakes by the home loan borrowers:

1. Opting for Teaser Home Loan Schemes: Banks come out with different home loan schemes to address different segments of the market. One of the very popular schemes is teaser home loan scheme. Under this scheme, in the initial years or months, interest rate is fixed as low as 8% to 9% per annum in order to attract customers. After the initial period, loan shifts to a floating rate of interest, typically accompanied by a steep increase in the applicable rate of interest. Those who choose such schemes must check if they have the ability to afford a higher EMI in future.

2. Borrowing more than you can pay as EMI to the bank: This is another very popular mistake that many home loan borrowers make. When banks check the loan eligibility of the borrower, they search each and every parameter and after that grant the home loan.

However, even borrowers must check whether they can reasonably pay the EMI while meeting their other commitments.

There should be adequate cushion available for slight increase in EMI.  Further, if the property being bought is still under construction and the borrower is staying on rent, he must check that he can pay the rent and pre-EMI at the same time.  Further, some parts of the cost of flat (such as stamp duty, registration, club charges, etc.) are typically not funded by banks. 

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So, borrower must have adequate cushion available to make these payments to the builder.  It is also common for builders to many a times increase the overall cost on some pretext or the other, so some cushion must be available to make this extra payment.  Try not to maximize your loan amount eligibility.  Opt for a loan tenure that is most comfortable but not necessarily the longest as you pay more interest to the bank for the same loan when you opt for longer loan tenure.

3. Not studying home loan agreement properly: As a home loan borrower, it is very important that you properly read and understand the home loan agreement before signing on the dotted line. It is a fact that more than 95% of the home loan borrowers don’t read the document properly. The loan agreement sets out the rights and obligations of the bank and the borrower. While the document may appear lengthy or complicated, it is important to read and understand it as you are agreeing to abide by it.

Feel free to ask your bank representative to explain to you any terms that you don’t understand in the loan agreement. Most importantly, the loan document will typically have a schedule that will list the applicable interest rate, charges and other commercial information. Please read this part very carefully and ensure that the contents are same as what you have been told by the salesperson.

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These are some of the mistakes that are often made by home loan applicant. Still, you need further suggestion about home loan in Mumbai, Bangalore or any other metro city in India, contact MyLoanCare sales team.