You want to buy your dream home. You apply for a home loan. The bank rejects the application saying you are not eligible for such a high amount as your income is low. This is where a joint loan becomes useful.

A joint home loan will allow you to get a higher loan as the income of co-borrowers will be considered. The number of people who can avail a joint home loan can be anywhere between 4 and 6, depending on their individual credit profiles

WHO ALL CAN APPLY?

Joint home loans can be taken by an applicant along with a spouse. You can also apply jointly with parents or siblings, but there could be certain conditions which you need to check with the bank beforehand.

Adhil Shetty, CEO, Bankbazaar.com says, "A married couple or a parent and child can take a joint loan. Some banks allow brothers to take a joint home loan provided they will both be co-owners of the property. Banks insist that all co-owners of the home must be coborrowers in a joint home loan.

However, sisters, friends or unmarried couples living together are generally not allowed to take joint home loans by banks.

LOAN ELIGIBILITY

The home loan eligibility goes up in the case of joint home loans as the repayment capacity goes up depending on the income of the co-applicant. For example, assume you would like to buy a property worth Rs 1 crore. The bank is ready to fund 80% which is Rs. 80 lakh. Suppose your income does not meet this requirement, then you will be forced to look at a house which costs less. However, if your spouse is working, then both your income as well as your spouse's income will be considered to determine the loan amount.

Renu Sud, managing director, HDFC, says, "If a women is a first applicant /co - applicant and sole or joint owner of the property then applicants can avail the home loan at 5 bps below the normal applicable home loan rate."

About 35% of monthly income as EMIs for all debt is ideal. Anything more than that could cause trouble, especially when your EMIs rise due to an increase in interest rates.

REPAYMENT PROCESS

The repayment process for a joint home loan is similar to that of a regular home loan. The payment can be made from a single or joint account by way of cheques or electronic clearing system (ECS).

Co-borrowers can also 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.

Most importantly, repayment of the joint home loan is the collective responsibility of all the borrowers.

Always remember to pay the EMIs as per schedule. If one of you fail to pay the EMI then the other will be liable towards payment. In case of any delay or defaults in EMI, legal action is taken against the borrower as well as the co-borrower.

WHAT HAPPENS IN CASE OF A DISPUTE?

All home loan applicants should sign a separate Legal Liability Agreement which clearly defines liability of each party and helps sort the situation in case of any dispute. In case of any default, the bank can proceed with the recovery process against all the co-operatives.

TAX BENEFITS

Both the applicants can claim tax benefits on servicing of the housing loan. For example, if co-borrowers are servicing the loan jointly in equal proportion, then each of them can claim tax benefit of up to Rs 2 lakhs on interest payment which effectively means they can claim up to Rs 4 lacs jointly which otherwise would have been limited to Rs 2 lakhs only. This helps them to get the effective rate of interest on their loan down substantially which is a huge saving.

Sanjiv Bajaj - Managing Director, Bajaj Capital, says, "One can avail tax benefit on home loan up to Rs 1.5 lakh under Section 80C and 2 lakh under Section 24. But if you go for a joint home loan along with your spouse in the ratio of 50: 50, then both of you can claim these benefits separately. So the combined limit will be Rs 3 lakh under Section 80C and 4 lakh under Section 24. This can reduce your overall cost of loan for the family considerably."

Bajaj adds that total deduction will be Rs 7 lakh and if both spouses are in the highest tax slab, they will get a tax benefit of Rs 210000- which is just double compared to an individual home loan, although this provision may vary from person to person.

Joint home loans are undeniably beneficial. So, joining hands with your better half makes good sense.