Joint Family Loan- Overview and Advantages

Many of us consider buying a home to be a once-in-a-lifetime investment. It is natural for one to desire and make it as large and better as possible. Affordability determines the size, location, and overall quality of our house. Without a doubt, having the option of availing of a home loan has increased affordability. However, your eligibility for a home loan is determined by your age, income level, and past debts that you are still repaying, among other factors.

To ease the repayment of your home loan, you can consider taking a joint family loan with your spouse, family members, or relatives.

A joint home loan allows you to share the burden of repayment and responsibility with a trusted family member. Moreover, you can avail yourself of better terms on these home financing options, such as a higher loan amount or reduced home loan interest with a co-applicant so both of you can gain joint family loan tax benefits.

Overview of Joint Family Loan

A Joint family loan involves several individuals applying for funding to buy a home. Co-applicants, who are usually spouses or family members, share both the duty and the benefits of loan repayment. By combining their salaries, joint applicants can be able to qualify for a bigger loan. They equally own the home and benefit from tax deductions on loan repayments.

However, all co-applicants are equally accountable for the loan repayments, which affects their credit score ratings. Clear legal agreements are required to establish ownership rights, responsibilities, and exit alternatives. Overall, joint family loans allow applicants to borrow more and make financial commitments together.

Also consider: Empowering Futures with HDFC Home Loans

Advantages of Joint Family Loan

• Co-applicants- All the individuals involved in the jointfamily loan are co-applicants. They share the responsibility of repaying the loan amount. An immediate family member can be your co-applicant also can be salaried or self-employed, Non-resident Indians or NRIs are also eligible to be co-applicants.

• Ownership- Joint loan applicants are co-owners of the property. This means all parties have equal rights to the property and are equally responsible for its upkeep.

• Eligibility- Joint loans often allow the applicants to combine their incomes, which can increase the total amount eligible for borrowing. This will be particularly beneficial if one applicant has a lower income or credit rating.

• Repayment of home loans- The repayment of the home loan is a shared responsibility. Lenders often consider all co-borrowers as being accountable for timely payments. This might be advantageous as it distributes the financial burden.

• Understanding legal aspects- Individuals need to understand the legal implications of joint family loans. Each co-applicant must be aware of their rights and obligations, especially in cases of default or dispute.

• Higher tax benefits- Availing a joint home will help both of you benefit from tax deductions. If you and your co-applicant are joint owners of the property and both are contributing to the repayment, then you can claim tax deductions separately. Section 80C of the Income Tax Act, you can claim up to Rs 1.5 lakh in a year on principal repayment. Also, you can claim up to Rs 2 lakh on interest repayments only if you are residing in your purchased property. If you have rented the property or house, then there is no limit on tax deductions that you can claim for interest repayments. Additionally, it is essential to note the extent of the deduction is based on the repayment and ownership proportions.

Documents Required

Below is the list of documents for a joint family loan:

• Identity proof- Aadhar card, PAN card, etc.
• Address proof- Aadhar card, rent agreement, etc.
• Proof of co-ownership (if necessary).
• Income proof, such as salary slips and bank statements from the past 6 months.
• Property documents.
• Signature verification by the bank of the applicant.
• Residence proof.
• 3 passport sized photographs.
• Form 16/IT Returns for the past 2 years (Salaried individuals).
• Proof of business address for non-salaried individuals. (Self-employed professionals).
• Challans as proof of Advance Income Tax payment. (Self-employed professionals).
• IT Returns/Assessment Orders copies of the last 3 years. (Self-employed professionals).
• Challans as proof of Advance Income Tax payment. (Self-Employed Businessmen).

List of Documents Required for NRI's

• Document establishing KYC.
• Salary Certificate from employer stating in English that the name must be as per passport, designation, passport number, date of joining, and latest salary.
• The last 3 months’ salary slips, which reflect incentives, overtime, etc.
• Latest IT Returns for applicants filing IT returns.
• For Self-employed NRIs, business documents like Trade Licenses, Sponsor Agreements, Power of Attorney, etc must be shown.
• Copy of Passport showing separate page for a residence visa.
• Proof of employment by the Government of the residing country like a work permit labor contract.
• Documents related to the Property with cost of estimation from an Indian engineer.
• Bank statement copies from overseas for the past 6 months.
• Last 6 months NRO/NRE bank statement.
• Employment Profile for the last 5 years.
• If an applicant is unavailable at the time of signing documents, Power of Attorney needs to be produced by the person acting on their behalf.

Final thoughts

While looking for your dream home, a joint family loan can be quite beneficial. A co-applicant with a higher credit score and salary boosts your chances of securing a higher amount loan for your dream house.

The repayment burden is also reduced since you share the responsibility with a co-borrower. However, it is critical to identify the best financial institutions that provide the higher rates, so conduct research and analysis before choosing a Joint Family Loan that meets your demands.