Buying a home is the highlight of life for most people. After years of waiting, the feeling of finally getting your own home is divine.
And when it comes to funding to buy a home, even if you have enough savings to self-finance, getting a house loan is a good option.
But while some people easily get their home loans approved, others struggle to do so. There are many factors to consider, from your income level, credit score, and unavailability of important documents.
A home loan eligibility calculator can help you even before applying and will help prepare the perfect application.
Generally, having a co-borrower makes your home loan application stronger. In case you are missing the eligibility criteria, you can bolster it by opting for one or more co-borrowers.
Read on to learn more.
What is A Co-Borrower?
A co-borrower or a co-applicant is a person who applies for a loan with another borrower and shares the liability. Both borrowers are responsible for the repayment of the loan.
The co-borrower does not necessarily have to be the co-owner of the property.
Here are some eligible relations who can be co-borrowers in a home loan application:
- Married couples are eligible for this type of loan. If both partners in the marriage are earning, they can increase their loan reliability.
- A father can be the co-applicant with their sons. If there is only one son to the father, either can be the principal owner. However, the father cannot be the principal owner if there is more than one son.
- Parents can be co-borrower with their daughters, but the property should be in the daughter’s name. Also, this case is only eligible for unmarried daughters.
- Two brothers can be co-borrowers of a loan if they live together when applying for a loan and intend to live together. However, both of them need to be co-owners in such cases.
- Brother and sister, unmarried daughter and parents, two sisters, cousins, and friends are not eligible to be co-borrowers in a loan.
Should You Add a Co-Borrower to Your Loan?
As we mentioned earlier, not everyone clears the eligibility criteria for a home loan. Co-borrowers assist you with this factor and allow you to avail of the loan. Adding a co-borrower increases your chances of getting the loan approved.
If both the partners opting for a house loan are working, the limit of the loan may get increased.
However, ensure that you check the applicant’s credit score and debt-to-income ratio. Also, ensure that your co-owner is financially disciplined and is ready for long-term commitments. If not, your credit score can become poor because of your borrower’s irresponsible behaviour.
Advantages of Having a Co-Applicant
If the co-applicants are also the co-owners of the house, they are eligible for tax benefits. Under section 80C of the Income Tax Act, you can get up to Rs. 1.5 lakhs for principal repayment and up to Rs. 2 lakhs for interest paid.
If the co-borrower is a woman, you can get even more benefits. Home lenders offer 5 bps lower interest rates to women borrowers. This benefit is only eligible if the woman is the sole owner or co-owner of the property.
Also, the benefits depend on the woman’s credit history and repayment history. Opt for an eligibility calculator for a home loan to determine your current situation.
A home loan is a secured loan. Still, financial institutions would like to see that it lends to credible applicants capable of paying back their loans with interest.
To this end, they encourage applicants to bring co-applicants on board. It helps diversify the risks for both the lender and borrower.
Overall, it’s safe to say that it’s much safer for either party’s home loan applications with a co-borrower to have a higher chance of getting approved.