Who can be a home loan co-applicant ? What are the advantages & disadvantages?

In the present day, when the cost of living is going up and usually both spouses work, having a home loan co-applicant becomes more of a necessity than a requirement. There is no legal requirement to have a home loan co-applicant.

home loan co-applicant


In order to enhance the loan eligibility, a borrower has an option to resort to by having a home loan co-applicant. This way, the total eligible income for the purpose of computing the housing loan increases, thereby resulting in higher loan eligibility.


Home loan co-applicant is a person who shares the equal responsibility towards the repayment of the home loan. Such type of home loans are called Joint home loans. Whereas a co-owner is the person who has a share in the property and rights on the property too. A co-owner of a property can be the co-applicant in home loan. But it is not necessary that the co-applicant of the home loan is the co-owner of the property.


Who can be a home loan co-applicant 


A bank does not permit friends or relatives who are not blood relatives to take a loan jointly. Only if the co-applicant receives income from a regular source will that income be considered for determining the loan eligibility.


In most cases, spouse is the most common and preferred combination.



In case of parents and children , these rules will apply:

  • Father/ Mother and son

If the applicant is the only son, he can jointly apply with his father with both the incomes being considered. The property should be in their names jointly and it does not matter who the main owner is. This is because in any case the son is the legal heir of the father’s property.

  • Father/ Mother and sons

In case a person has two or more sons and if he wants to apply jointly with one of them, he should not be the main owner of the property. This is because, on his death, his children should inherit the property jointly and may cause an inheritance dispute.

The father may only be taken as co-applicant and his income may be considered for the loan. He may be a co-owner or not own the property at all. Under no condition should he be the main owner of the property.

  • Unmarried daughter and Father/ Mother

An unmarried daughter can apply jointly with their father. However, the property should only be in the name of the daughter and the income of the father should not be considered . This is to avoid any legal complications on the subsequent marriage of the applicant .

Where applicant is the owner and has a son and a daughter, an affidavit may be obtained from the daughter that she has no claim on the property.


In case of Brother and brother/sister 

Home loan co-applicant approval is subject to certain terms and conditions like address of both should be same which means a joint family and intent to stay together in joint family in future. It is at the sole discretion of the bank.


Who cannot be a home loan co-applicant :

  • Father / Mother and Married Daughter 
  • Brother and Sister 
  • Sister and Sister

Documents Needed : Documents are needed from both the applicant and co-applicant. 


General home loan documents needed are :

  1. Identity proof
  2. Address proof
  3. Salary slips
  4. Bank statements

Loan Eligibility

A common doubt is – ‘Will the home loan eligibility amount increase if we opt for a joint home loan?’  Yes, it will. Banks will be ready to offer you higher loan amounts if you opt for a joint home loan. The reason for it is that your repayment capacity increases as there are now two people who repay this loan. How much it would increase depends on the income of co-applicant. Apart from income, organization reputation is also considered. Be sure that you compare multiple loan offers before deciding on loan eligibility.

Benefits of being a Home Loan Applicant 

  • Increase Home Loan Eligibility :

If you are not the co-owner of property but would like to help your spouse or relative to increase their Home Loan eligibility. In this case, you may consider being home loan co-applicant. It is absolutely necessary that you should be aware of all the risks and legal liabilities.

  • Taxation Benefits :

From a taxation point of view, a joint home loan is also beneficial as all co-borrowers can claim tax deductions under section 24 (upto Rs. 1.5 lakh) of the Income Tax Act against interest paid and under Section 80C (up to Rs. 1 lakh ) against principal repaid. 


The tax benefits that can be claimed would be in proportion of the share that the individuals have in the loan.

Dis-advantages of being a Co-applicant 

  • CIBIL score of the co-applicant will be impacted.
  • Reduced credit eligibility : Being a co-applicant will reduce the credit eligibility to the extent of 50% of home loan value. It may impact approval of any future credit requirement of co-applicant.
  • Operational Hassle : It is an operational nightmare  for home loan co-applicant at the time of availing or closing the home loan.

Repayment Options 
The repayment process for joint home loan is similar to that of a regular home loan. The payment, however, has to be made through one cheque. 


Renu Sud Karnad, manging director, HDFC, explains, “Payments can be from a single or joint account by way of cheques or Electronic Clearing System (ECS).” 


“Another way of repayment could be that the co-borrowers share the number of EMIs between them such that a specific number of cheques can be issued by one borrower and the balance by the other,”  says Suvrat Saigal of Barclays Corporate India.


What if Dispute Arises
home loan co-applicantThe problem arises when one of the co-borrowers refuses to repay the loan. Be warned that  each party would be liable for part of repayment or up to as much as all of the repayments.


Renu Sud Karnad of HDFC says, “It does not matter whether the payment is made in the normal course by only one of the joint borrowers as long as the full EMI is paid as per schedule”.


In the event of default, the lender will proceed with the normal recovery process  which may include a legal recourse against all joint borrowers.

Solution 

home loan co-applicant

  • Agreement between all Home Loan Applicants  – 

To avoid any legal dispute in future, it is advisable to all home loan applicants to sign a separate legal liability agreement on a stamp paper. And get the paper notarized. This agreement will clearly segregate the liability of each party. 

  • Online Term insurance Plan – 

What if bank insists on a co-applicant. If the bank insists only to hedge risk against home loan repayment, then a simple solution is that the primary borrower can buy an online term insurance plan and can submit a copy of a that policy assuring bank that bank that he is insured against home loan.


Conclusion


Joint home loans are definitely beneficial as compared to normal home loans. In case you are looking for a home loan and you can speak to your blood relatives to get a joint home loan, be sure that the EMIs are paid as per schedule.

Second Home – A Relaxing Option?

With increasing affluence on the one hand and a growing realization that there is a need for a relaxed lifestyle at least on weekends, the concept of second homes appears to be gaining popularity. According to the National Council of Applied Economic Re­search, the number of households de­scribed as rich is expected to reach 11 million by 2013 from 3 million in 2003. Meanwhile, the number of mid­dle class aspirers is predicted to leap even more dramatically, from 46 mil­lion to 124 million. The number of HNW Is in India is growing at 20% YoY, second only to Singapore.

This growing opulence of Indians surely makes the second-home mar­ket pretty hot. According to a study conducted by Kapston.com, a Banga­lore-based E-business consulting firm, second-home sales in India in­creased by 50% from 2002 to 2007. The trend slowed a bit in 2008, most­ly due to the economic woes of the US. Then it picked up in mid-2010 to slow down slightly only in the recent time, although now it’s a normal, reg­ulated market where good stuff sells very quickly.


Motive 

Different people invest in a secondproperty with different motives. For some, second home is to have a re­laxing place away from the hustle and bustle of city life, extreme heat and the stresses of work. There are many who’d like to have a second home to spend the rest of their lives in, post-retirement. Others invest in a second home in order to earn rental income.

The primary reason for buying a second home is still lifestyle among Indians; however people have start­ed realizing the investment potential, but the investment consideration comes in a strong second place.


Be Wise 

Even if buying a second home in­volves spending a lot more money be­fore retirement, you will be wise to consider it as an investment. If, for ex­ample, you buy a second home five years before you retire, you will be able to earn money by renting out your property for the next five years, and cover a part of the mort­gage costs.


For NRIs

And it’s not only for Indian dwellers. Non-resident Indians are buying this mid-level housing as well. NRIs can easily attain housing in In­dia because they were born there— but they can also buy even if their parents or grandparents were born there.

Many NRIs choose to go back to where they came from; they have dreams of having India as a possible place to retire, where hired maid ser­vants will run their day-to-day tasks while they relax close to friends and family. The home towns where they grew up always have a certain draw on their heart strings.


A second home is not a bad idea. It can serve the purpose of a change from the routine, once in a while, and leave you refreshed and energized. It can also be a wise investment. In fact people in the higher income brackets even opt for more than one second home as part of their long term in­vestment strategy.

The Hidden Costs of Buying A Home

The Hidden Costs of Buying A Home

Everyone knows that buying your first home is an expensive ordeal—just the cost of a down payment alone can be significant for many buyers. But those aren’t the only costs that you have to consider prior to home shopping.

First-time buyers often don’t realize that they will need to pay for more than just the selling price that they negotiate with a seller. Things like interiors, hookup fees for utilities, and appliances are all extra expenses which add to the hidden costs of buying a home.

So what else do you need to budget for as a first-time buyer? Follow along as we take you through the basics.

Step One: Before You Buy

Before you start booking viewings, figuring out a budget, or even broHidden costs of buying a homewsing through furniture stores, you need to figure out what your real costs are going to be. Your down payment is not the only upfront cost that you are going to have to pay, so you need to make sure that you hold enough back to cover all of the extras, such as:

Legal fees

Though mentioned in the cost sheet by the seller. Take care that you are in the safe side wuith the legal charges.

Agent fees

If you are buying a house using a real estate agent, make sure that you have your terms discussed in detail before proceeding further. Usually it is 1% – 2% of the property cost. 

However, the agent is paid a percentage of the sale price upon the completion of the transaction.

Inspection and appraisal

The trend now in India with the sellers is, they mention the cost for the government approval in the price sheet. So be clever and conscious when you calculate the cost of the property. Please do research on the present trend and compare in your price sheet.

Mortgage with interest

So maybe you have a general idea of what you can afford for a mortgage, but did you factor in an interest rate? Will your interest rate change based on your down payment? Will your rate fluctuate, or will it be fixed?

You will need to talk to your bank about this, to see how much you qualify for and what they can offer to you. Your monthly payments can change significantly based on your interest rate, so if you get an offer that seems high, feel free to shop around for one that better suits your bank account.

Note : Feel free to visit our website (www.loanyantra.com) for constant alerts on interest rate changes and also for zero fee balance transfer.

Step Two: After You Pick a House

Don’t put away your calculator yet!  Sure, you made your budget work for the “before” costs, but don’t forget about the “during” hidden costs of buying a home, which include:

Moving expenses

Do you have enough stuff to warrant a moving truck or movers? Is your new place far away from your current one? If you need, or want, to hire movers, you’ll need to figure out the cost. Depending on your preferences, movers can get pricey.

For example, if you just rent a moving truck or trailer, your costs will be moderately low. But if you need people to help pack your things and move your items out of one house and into another, you’re going to have to cough up some extra cash.

Home Insurance

Homes come with all kinds of monthly expenses, and insurance is one of the necessary ones. Depending on the age and condition of your home, your location, your insurance history, and so on, your insurance rates will fluctuate. They’ll also vary drastically by provider.

Be sure to shop around for the best coverage and price for your personal needs.

Interiors and Utilities

We all know that interior designing and buying utilities are going to cost money; that is inevitable. Interior designers will surely cost your pocket. So depending on your financial situation, take a call. There are plenty of options around. Probably, it is time for you now to look up for offers and sale. Now-a-days, shopping online and cash on delivery options make things easier and economical as well. So think wise before you shop either online or outdoor. The idea is to save money and time too.

Property tax

Property taxes are something that every homeowner has to pay, and they vary by location. And this is one of the taxes the government is strictly probing. So to avoid paying lump-sum, plan well in advance. 

Step Three: Once You Move

So, you figured out a budget and selected a house. Since you’ve probably put a lot of your cash into the process so far, it might be difficult for you to consider parting with any more of your money, but chances are you still need a few things to turn your new house into a home.

Take a deep breath and remember:

  • There will be unexpected costs. Maybe something gets damaged in the move, or maybe you need to change the locks to your new house. Don’t beat yourself up for not thinking about every single cost involved.
  • Your first grocery trip is going to be expensive. Why? Because, chances are you need to stock up on groceries, spices, canned goods, and other staples. Don’t worry, you’ll only need to do a move-in shop once. The rest of the time you’ll just buy what you need, when you need it.
  • All of the money that you were saving isn’t gone. It’s finally gone towards what you were saving for in the first place.

Setting up House and Settling in

You won’t often hear that buying a house is easy, but you won’t hear too many regrets about doing it either. It’s a big purchase, and it’s bound to be a bit complicated, but don’t let that keep you from building equity and making a home of your own.

Spend wisely, save for a rainy day, and cover your most important costs before anything else and you’ll have a happy and financially healthy home to call your very own.

Home Loan – Apply online; know the present interest rates! – Loanyantra

Now-a-days, competition for home loans has outgrown competition for homes. This rose a requirement of applying online for a home loan.

When you can search for your home online, then why not search for a home loan online. So after searching and applying online, we take our services a step forward. This idea is in action only to take the home loan and the related services to our customers customized. 

Loanyantra

What makes us different from others.

As we are, our service starts where many others’ end.

Once you apply online, we take you through the process, which is simple and transparent. Check your eligibility and we guide you to the customized interest rates. If you find us your true beneficiary, associate with us. You will get a call within no time. Get home loan approval from the required bank.

So now, you experience our efforts. Retire from your home loan thoughts. You are into our loan rate shield process. We send you alerts on changing interest rates and suggest you for a balance transfer when needed. 

Infact, we are managing your loan. Each step, from the time you enter your details, apply online, getting customized rates, getting required bank approvals, and timely alerts, we try to save your valuable time, make it economical and most important keep you away from stress.

For details, visit, Loanyantra .

Thinking of financing your first home? Know these things!

Financing your first home

For most people, buying a home is the biggest purchase they will ever make, and the majority of first-time buyers need to obtain financing in order to do so. With such a large number on the table, it’s important to choose financing that works for you in both the short- and long-term.

financing your first home

From down payments, to mortgage brokers and traditional lenders such as banks, we’ll explore what options are best for financing your first home.

Should I Use a Mortgage Broker?

A mortgage broker is someone who provides you, the borrower, with financing options from various lenders. Think of them as a sort of mortgage middleman.

You provide them with financial details about yourself, such as your job history, credit report, down payment amount, etc., and they take your information to various private lenders to see what they can offer you for an interest rate and mortgage term.

There are many potential pros to using mortgage brokers, such as:

  • Communicating between you and a lender.
  • Lower interest rates.
  • Flexibility for a typical borrowers.

As well as cons, that can include:

  • Inability to service your loan.

Mortgage brokers are able to present your information to multiple lenders, allowing for flexibility if you don’t meet the strict standards usually required by banks. Often, mortgage brokers are able to find options for those who are self-employed, who have poor credit history, or a short job history. But remember that those options may come with penalties, such as a higher interest rate or a larger down payment.

If you do choose to go with a broker, make sure that you choose someone who has a good reputation and a lot of experience.

Should I Use a Traditional Lender?

Traditional lenders, namely banks, provide mortgages to clients, allowing both parties to communicate directly. Often, first-time homebuyers with good credit, a down payment, and at least a year’s worth of job history will contact their bank first when seeking a mortgage.

Banks tend to have pre-designed mortgage options, which includes interest rates, terms, and so on.

The benefits of choosing a bank can include:

  • Reliability, trust, and security.
  • Potential savings for clients with multiple accounts.
  • Faster approval.

While some negatives are:

  • Less flexibility for buyers who are self-employed, or who have poor or little credit history.
  • More rigorous requirements.
  • Limited choices in terms of rates, length, and more.

When exploring the option of using a bank as your lender, remember that you don’t have to stick to the bank that you have other accounts with. Feel free to explore what other banks are offering. Some may offer bonuses for having checking or savings accounts with them, or based on the down payment that you will make.

If you do choose to go with a bank, be sure that it is a bank that you feel comfortable with and that you have them walk you through the terms of your mortgage so that you understand the ins and outs.

Should I Save for a Cash Sale?

Cash sales are probably the most desirable types of home purchases, since the buyer forgoes interest rates, mortgage terms, and the stress of finding a lender, but not many buyers are able to purchase a home using cash alone.

In smaller towns or less desirable areas, homes can go for reasonably low prices, which may allow you to save enough to buy one, but in areas with higher demand or in cities, home prices aren’t quite as affordable.

In order to save for a cheaper home it can take years to put away enough to make the purchase, but for even a moderately priced home it can take even longer, depending on your income and expenses.

Often, buyers who are able to purchase using cash benefited from an inheritance or something similar, but just because you have the cash to cover your house entirely doesn’t mean that you should use it all.

Before choosing to use all of your cash to secure a home, consider the following:

  • If I use all of my savings to purchase a home, will I be left cash poor?
  • What will the cost of renovations, repairs, or other fees outside of the mortgage be?
  • Am I borrowing money from someone I will need to pay back?
  • How long will it take me to save for a home, based on both my expenses and inflation?

How Should I Finance My Mortgage?

How you finance your mortgage, whether through a broker or a bank, using just enough cash to cover the down payment, or paying for your home entirely, depends on your financial situation, the property, and your goals not just for now, but down the road.

Not every lender is suitable for every buyer, and only you can decide which avenue makes you feel the most confident and comfortable. Take your time, shop around, and explore what is available to you. In educating yourself about your options, you can make the best choice for you and your finances.

Note : Our (loanyantra.com) customers can always find us as a reliable source in managing the home loan as we suggest you the best home loan option that suits your financial situation, and always alert you with the changes in interest rates. 

Visit www.loanyantra.com for details.