Whether you’re dreaming of a cozy first nest, planning for your growing family, or looking to invest in your future, the path to homeownership is filled with important decisions. One such decision is whether to add a co-applicant to your home loan. This choice isn’t just about numbers and credit scores—it’s about partnership, trust, and shared dreams.
Did your home loan get rejected? Make it attainable by adding a co-applicant!
Benefits of Adding a Co-Applicant to Your Home Loan
Here are the key benefits of adding a co-borrower to your home loan in India:
Eligibility for Higher Loan Amounts
Adding a co-borrower with a stable income increases the combined eligibility for a higher loan amount.
For Example: A single applicant earning ₹6 lakh annually may be eligible for a ₹30 lakh loan. With a co-borrower earning ₹5 lakh, the eligibility might increase to ₹50 lakh.
Shared Loan Repayment
The EMI burden is divided between two, easing financial stress.
For Example: If the monthly EMI is ₹30,000, two co-borrowers can split it to ₹15,000 each, making it more manageable.
Better Interest Rates
Lenders may offer lower interest rates if a co-borrower has a strong credit history.
For Example: A single borrower with a credit score of 650 might get a 10.5% interest rate, but with a co-borrower having a score of 750, the rate could drop to 8.5%.
Tax Benefits
Both co-borrowers can claim tax deductions under sections 80C and 24(b) of the Income Tax Act.
For Example: Each co-borrower can claim up to ₹1.5 lakh on principal under Section 80C and ₹2 lakh on interest under Section 24(b). This adds up to ₹3.5 lakh per year.
Improved Chances of Approval
Adding a co-borrower reduces the lender’s risk, increasing chances of loan approval.
For Example: A self-employed individual with irregular income might face loan rejection, but adding a salaried co-borrowers can significantly improve approval chances.
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Who is Eligible to be a Co – Applicant?
| Relationship | Co-Applicant Eligibility |
|---|---|
| Father and Son | Both incomes considered if the son is the only child; property must be in joint names; father can’t be primary. |
| Unmarried Daughter and Father | Daughter can apply with father, but father’s income is not considered to avoid legal issues post-marriage. |
| Brothers and Sisters | Brother can be co-applicant if living together; sister cannot be co-applicant for a brother or another sister. |
| Husband and Wife | Wife can be co-applicant if earning; both incomes considered; eligible for tax benefits. |
| Minors | Cannot be co-applicants. |
Can a Co Applicant Be Removed From a Home Loan?
- Consent & Lender Requirements
- Both primary and co-applicant must agree.
- Lender may have specific conditions.
- Request a Novation
- Check if loan agreement allows novation.
- Submit written request with:
- Original loan agreement
- Valid reason (e.g., marital status change, financial difficulty)
- If replacing, ensure new applicant meets lender’s criteria.
- Await lender’s approval and updated loan agreement.
- Prove Your Eligibility
- Provide:
- Proof of income (salary slips, bank statements)
- Proof of assets
- Good credit score
- Submit evidence for co-applicant’s removal (e.g., poor credit report).
- Optionally add a new co-applicant.
- Negotiate with lender if needed.
- Provide:
- Consider Refinancing
- Apply for a new loan in your name only.
- Use new loan to pay off existing loan.
- Assess financial readiness:
- Check credit score, income, assets
- Choose a loan amount covering outstanding balance and refinancing costs.
- Upon approval, finalize the removal of co-applicant.
Conclusion
Adding a co-applicant to your home loan can be a strategic move to enhance your borrowing capacity, improve loan approval chances, and potentially secure better interest rates.
If you’re considering taking a home loan and need expert guidance, Credit Dharma is here to help you navigate the process smoothly and find the best loan options tailored to your needs.
Frequently Asked Questions
A co-applicant is an additional person who applies for the home loan alongside the primary applicant. They share the responsibility of repaying the loan and can help improve the chances of approval by boosting the combined income and credit profile.
Adding a co-applicant can enhance your loan approval chances by increasing the total income and providing a stronger credit history. This makes you a lower risk to lenders, potentially leading to higher loan amounts and better terms.
While a co-applicant with bad credit can still be added, it may negatively impact your loan application. Lenders consider the credit history of all applicants, so poor credit can lead to higher interest rates or even rejection of the loan.
Typically, both applicants need to be Indian citizens or have legal residency status. Lenders require all co-applicants to meet their eligibility criteria, which may include residency and employment requirements.
Removing a co-applicant from a home loan is possible but can be complex. It usually requires refinancing the loan solely in the primary applicant’s name, subject to lender approval and meeting their eligibility criteria.
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