Taking a joint home loan? 4 disadvantages to keep in mind

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September 15, 2020 12:33 PM

Among the benefits of a joint loan, people mostly prefer opting for it, not only for the approval of a bigger loan amount but also as they get a chance to get an additional concession and increased tax benefit. However, taking a joint home loan also comes with certain drawbacks.

home loan, loan, bank loan, loan restructuring, joint home loan,Here are some of the things you need to beware of while taking a joint home loan;

 

With as many as 6 co-applicants a joint home loan can be opted for. Various lending institutes usually give this option, especially for big ticket-size loans. Even though there are benefits of taking a joint home loan, be it with your spouse or more family members, it comes with its own set of pros and cons. Home loans are secured loans and with the EMI option payback, these big ticket-size loans become convenient for borrowers over a long period of time.

Among the benefits of a joint loan, people mostly prefer opting for it, not only for the approval of a bigger loan amount but also as they get a chance to get an additional concession and increased tax benefit. Between an individual loan and a joint loan, the loan amount difference can be up to Rs 20 lakh to Rs 30 lakh. Additionally, banks also offer lower interest rates to women borrowers. However, taking a joint home loan also comes with certain drawbacks.

Here are some of the things you need to beware of while taking a joint home loan;

– Share of the property
Applicants get a limited share of the property. For instance, between husband and wife, if any of the co-applicants dies without a proper will, leaving only the surviving spouse as the only co-applicant, the surviving spouse will get only one-third share of the property. In such a case, with property or assets, in the absence of a will, the property will be split among parents, wife, and children of the deceased.

– Credit score and Eligibility
After taking a joint home loan, if anyone of the partners refuses to pay the home loan EMI, the credit score of all the applicants are affected equally. Experts say this is seen mostly with loans taken with a large number of co-applicants. As partners get impacted equally with default in paying EMIs, it also lowers the eligibility for a loan in the future for all of them.

– Death of spouse
Similarly, if a home loan has been taken by both husband and wife, in case of death of either of the co-applicants, the burden of clearing the home loan falls entirely on the surviving partner. The full repayment then needs to be cleared by the surviving spouse. In the case of non-repayment of the loan, the assets can even be seized from the applicant, by the bank/lender.

– Divorce
In case a loan has been taken by husband and wife, and there is a divorce between the spouses, the loan repayment usually becomes a sore subject. For instance, if one of the applicants in a joint home loan stops paying the EMIs after divorce, the burden of repaying the entire loan falls on the other applicant. Note that this happens without the benefit of ownership of the property. Hence, experts say between spouses, they can sign an agreement mentioning each partner’s share of the loan liability, to stay clear of this, and to avoid differences as such in the future.

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