There are also certain drawbacks of taking a joint home loan. Experts suggest borrowers should make an informed decision before opting for such a loan.
Home loans are big ticket-size loans. Hence, opt to take a joint home loan with your spouse, as the amount is huge. Home loans are secured loans and the payback of the home loan is convenient as borrowers can opt for EMIs (equated monthly installments) and repay the loan over a longer period of time.
Even though there are benefits of taking a joint home loan with your spouse, a joint home loan comes with its own pros and cons. For instance, if you take a joint home loan, not only you get an additional concession, you also get approval for a bigger loan amount and even increased tax benefit. Such as, the difference between taking an individual loan and taking a joint loan with your spouse can be of Rs 20-30 lakh in the loan amount. Also, most banks usually give lower interest rates to women applicants.
However, there are also certain drawbacks of taking a joint home loan. Experts suggest borrowers should make an informed decision before opting for such a loan.
Here are some of the things you should keep in mind before taking a joint home loan;
Limited share of the property
If the husband dies without a will and vice versa, and the spouse is only a co-applicant, as a legal heir he/she will only get one-third share of the property. This is because, the property or assets, in general, is split among parents, wife, and children of the deceased, in the absence of a will.
Death or divorce between the spouses
Industry experts suggest loan repayment can become a sore subject, in case the couple plans to stay separately or split up. For instance, if the husband in a case is the co-applicant for a joint home loan, and the wife stops paying the EMIs after a divorce, the burden of repaying the entire loan falls on the husband without the benefit of ownership of the property. To stay clear of this problem, both the applicants can sign an agreement specifying each partner’s share of loan liability, to avoid differences in the future.
In the case of death of either of the couple, clearing the dues falls entirely on the surviving spouse. The repayment then needs to be done by the surviving spouse and with non-repayment of the loan, the lender can even seize the assets from the co-applicant.
Credit score and Eligibility
If either one of the partners as joint applicants in a joint home loan refuses to pay the home loan EMI, the credit score of both partners will be affected equally. In case of a default or not paying EMIs will impact and lower the eligibility for a loan in the future for both the applicants.