Any homebuyer seeking to purchase a home through loan would want the processing to get through as soon as possible to ensure that the house that they have selected is not sold out by the time formalities are completed.
While personal credibility, income, and bankable assets play a large role in deciding your home loan eligibility, the approval procedures get a boost if there is a co-borrower.
To ensure that you are able to buy the home of your choice it is best to use a home loan eligibility calculator and then select a house depending on the loan amount you are eligible for to avoid disappointment.
Who is a co-borrower and how are they helpful?
A co-borrower is an individual that takes a personal guarantee with the main borrower to pay the home loan on time. The co-borrower can do this either to ensure that the housing loan eligibility improves or to avail of tax benefits that he/she would be paying due to high income. A co-borrower always has to be a close relative of the chief borrower, and usually, the husband and wife have the best chances of applying for a joint home loan.
While business partners, friends, or unmarried couples are not accepted as co-borrowers, even brothers and sisters are not accepted as co-borrowers as lending agencies regard them as relationships that may break up in the future.
Minor sons and daughters also cannot be regarded as co-applicants in a house loan application.
Is a co-borrower also a co-owner of the house?
A co-borrower on a home loan application does not automatically become the co-owner of the house.
As the main purpose of having a co-applicant is to enhance the borrower’s eligibility for the home loan, generally only their income is considered. In cases where the home loan co-applicant insists that he/she also be considered as the co-owner of the property, exemptions would be made in the records.
Co-borrowers can then claim tax benefits for the loan amount that they would be paying to service the loan. If the co-borrower is not willing to service the loan payments, then they cannot claim tax benefits.
Common criteria to check home loan eligibility for co-borrowers
- Co-borrowers as family members – Two brothers can become co-borrowers on a home loan if they plan to stay in the house together as co-owners. But brother and sister or two sisters cannot be accepted as co-borrowers for a home loan. While the father and only son can become co-borrowers for a home loan depending upon the former’s age, father and daughter cannot enter into a similar agreement. Mother and daughter can become joint applicants for a property loan but the mother’s income is not considered for loan eligibility and the property is in the daughter’s name.
- In the case of dispute – If at a later stage both borrowers have a dispute and refuse to be a part of the agreement with the lender and default on the payment then they both are jointly liable to face legal action. The bank or financial institution that has lent the funds can initiate recovery proceedings against all co-borrowers.
This article was originally published on www.thehindu.com dated August 16,2017
