Here is how to benefit from it if the spouse becomes co-applicant when applying for a mortgage
Buying a home is a once-in-a-lifetime dream for most of us. Imagine, the home you want is slightly off budget and even after stretching your finances the lender is unwilling to offer you a home loan for it. Making someone a co-applicant for your mortgage application at the bank or housing finance company will do the job. By adding a co-applicant, mortgage eligibility is improved as the income of both applicants is considered. However, making someone a co-applicant does not work and the lender will only insist that certain family members play the role of co-applicant. “A co-applicant in a home loan application is usually a spouse, brother, father or mother. A co-applicant is taken to secure the applicant in case something happens to them at a later stage, ”said Sanjay Chaturvedi, CEO of Shubham Housing Finance.
If the goal is to improve loan eligibility, the winning family member is fine. For working couples, it certainly makes sense to apply for home loans as co-applicants. In such a case, the spouse’s income is taken into account for the calculation of eligibility for the mortgage. “If the income of a co-applicant is taken into account for the loan, all documents submitted by the lead applicant must also be submitted by the co-applicant,” explains Chaturvedi.
Typically, banks provide loans where the EMI can easily cover 50 percent of applicants’ overall take home pay. For example, if the husband and wife’s take-home pay is Rs 2 lakh, the bank will be comfortable with granting a loan with an EMI of around Rs 1 lakh per month. At 8.5% on a 15 year loan, the total loan is Rs 1 crore for that EMI amount.
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It’s not that becoming a co-applicant only helps the lead applicant. There are also advantages for the co-applicant. Chaturvedi informs: “A co-applicant by joining a loan can create their own credit history. As their details are captured and with regular payments it can increase their credit score which is factored in if the co-applicant wishes to apply for another loan. Also, if the co-applicant wishes to obtain tax advantages as a co-applicant, it is possible to do so. “A co-applicant can derive tax advantages from this. It is generally prorated to the amount decided upon when registering the property. Or, in proportion to the monthly payments, ”adds Chaturvedi.