What is a co-borrower? Many applicants often overlook minor details while adding a co-applicant to their loan applications, which can cause further misunderstandings. A loan amount is significant in nature, and the help of a co-borrower can ease the burden of repayment, which is too much to bear alone. A person of Indian nationality and a blood relative with excellent credit score, documents in order, and regular income can easily become your co-borrower for a home loan.
An individual, who does not qualify for a loan can add multiple co-borrower with excellent credit history to their application to also increase the principal amount of the loan. In times when the real estate market fluctuates frequently, it becomes almost impossible for the common man even to secure a loan let alone dream of owning a house. Due to low job opportunities, low salaries, and high expenses, there is not enough money left for investment in a property. Lack of insufficient income results in high debt and low rate of repayment, which in turn makes for a bad credit score. When applying for a home loan to a bank or NBFC, the first think verified about a client is their credit score, which can then approve or reject your application.
In such cases, it is important to check beforehand your current financial status and get your credit score straight before applying for a loan. Since there is a higher risk of rejection, it is wise to have multiple co-borrowers with excellent credit history on your application. Parents or spouses are your best bet as co-borrowers as it increases your chances of approval and a higher principal loan amount. Applicants must also seek legal advice if they are themselves not well-versed with the application process, hiring an architect and a contractor can help you paint a picture of what your construction will cost and what would be the end result of it.
Applicants who apply with a co-borrower for a home loan are qualified for a higher tax deduction, given that all co-borrowers are co-owners as well. Under Section 24 and Section 80(C) spouses who are co-borrowers can avail tax deductions separately on the principal amount and interest repaid on their salaries. Banks also insist that the borrower also be the co-applicant on the loan application if you own a property jointly.
Having a spouse as your co-owner can benefit them too in many ways by increasing their credit score and timely repayment of the loan. For further loan approvals, it is best to have a co-borrower on your application. In case you wish to live alone in the purchased house, it is best to choose a single holding loan. For other arrangements, there is always a joint home loan available.
Applicants who have applied for a loan with spouses must also have separate life insurance in case a dispute arises between the spouses, or one spouse ceased to exist. In the case of defaulting on the loan by one spouse, the sole responsibility of paying back the loan falls upon the first spouse and obtain ⅓ of the property only if they are co-applicants on the loan application.
In case the deceased is husband, without leaving a will the property automatically is distributed among the wife, kids, and his mother.
Applicants must first arrange for means to pay back the loan before even applying for the loan. With the help of an EMI calculator, set aside a fixed amount for the EMI installments that will be automatically deducted every month from your account. Having a detailed plan in place with intentions to pay back the loan, a clear credit history, regular fixed salary income can easily help you get a loan and achieve your dreams.