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Planning on Applying for Home Loan with a Co-Borrower?

Planning on Applying for Home Loan with a Co-Borrower?

People are rapidly applying and benefiting from Home loans. There has been a tremendous rise in home loan applications in recent years. Many borrowers prefer applying for a joint loan as they can avail various benefits, such as a higher loan amount, income tax rebates, better credit scores, etc. When applying for a joint loan, the co borrower also shares the ownership of the home loan in an asset with you or group or individual. There are certain eligibility rules and prerequisites which have to be met for the loan to be sanctioned.

  • A maximum of six and a minimum of two people can apply for a joint loan.
  • Banks and NBFCs prefer that a co-borrower should be the co-owner of the property.
  • The joint home loan repayment is considered as a collective responsibility of the prime borrower as well as co-borrower(s). Each being equally liable for repayment of EMIs.
  • In case of the home loan borrowers being married, it is considered as the most ideal arrangement to the home loan lenders or providers. Here they have the freedom to choose who can be the primary borrower.
  • If the applicants of the home loan are the son and father, or an unmarried daughter and father/ mother and unmarried daughter or mother and son, then bank or NBFCs prefer the son or daughter to be the primary owner of the property.
  • When two brothers apply for a home loan, the Bank or NBFCs insist that both the brothers should be the co-owner of the property.
  • Unmarried couple, friends living together or friends claiming for the joint home loan are generally not allowed as joint applicants.

Additional reading: Save with a joint home loan

 As the home loan co-borrower and co-applicant are considered the same as they share equal responsibility as far as the repayment is concerned, under special situations, the lender might consider transferring the loan completely to a co-borrower. But in case of any conflicts between them, the co-borrower can be in a disadvantage.

  1. Conflict between Wife and Husband – In case of a dispute between a husband and wife, where either is a co-borrower and both pay the EMIs for the home loan, if any one of them stops paying the EMI then the other borrower faces problem.
  2. In case of death of either prime borrower or co-borrower – Under such a circumstance, the rest of the amount has to be paid by the borrower who is alive. It becomes the person’s responsibility to repay the complete EMIs.
  3. Inheritance beneficiary are different- if husband and wife are the borrowers of a home loan and the husband decides to Will the property to the parents or siblings and not to wife or decides to distribute the property between parents and wife, the if a wife is not co-owner but just a co-applicant then it can create a huge trouble for her in case of any disputes later.

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To avoid such disputes later, it is important for the home loan applicants to have separate legal liability agreement that has all the terms and conditions mentioned. Banks promote the co-borrowing as it reduces the risk of defaulting in repayment of the loan.


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