When you apply for a Home Loan, you have the option to either apply as a sole applicant or along with co-applicants. These co-applicants can not only enhance your chances of getting the loan but also help you in the repayment thus lessening your financial burden.
However, being a co-applicant is a huge responsibility, and the lenders have a set of rules and regulations pertaining to who can be eligible to be a co-borrower along with you.
The co-applicant may or may not be a co-owner of the house, but they are equally responsible for repaying the Home Loan and their credit score will also be impacted in case you default on the loan.
Here are some valid combinations of co-applicants permitted by the lending institutions that are eligible for Home Loan offers:
Your spouse can be a co-applicant when you apply for a Home Loan. However, this combination may lead to possible legal disputes in case of a divorce.
Two brothers are eligible to be co-applicants for obtaining a Home Loan if they live together. Some lending institutions also emphasise that the two brothers be co-owners and live together in the new property as well. However, not more than two brothers can become co-applicants.
This is a valid combination for all Home Loan offers. If you are the only son or have only one son, then you can also be a co-owner of the property. However, if there is more than one son (in case the father is the main applicant) or if you have a sibling (if the son is the main applicant), then the property can only be in the name of the main applicant.
This combination is possible only in the case if the daughter is unmarried and the property is in her name. Also, the parent’s income can’t be taken into account to determine the loan eligibility. A parent can’t be co-applicant with a married daughter.
These two combinations are not permitted even though they are related by blood. This is because traditions in India necessitate a sister to go into a different family post marriage. This would mean that she can’t be held accountable for repayment of a loan after marriage. This holds true for a sister and sister combination also as they would normally go into two different families and won’t be living together.
While you may live in a joint family with many cousins, uncles, and siblings under one roof, not everyone can be your co-applicant. This is because of various reasons like:
Your co-applicant has a legal obligation towards the loan repayment. So your lender would want nothing to disrupt the repayment, especially if there are chances that it could lead to a legal dispute. Any combination that has a high probability for a future legal dispute is considered high risk and, is surely not an option when you want to Avail a Home Loan . Hence, lending institutions would not allow you to avail a Home Loan with a sister or a married daughter as a co-applicant.
When you apply for a Home Loan, your lender would want your credit score to match with that of the co-applicant. While a co-applicant with a low credit score can still get you a Home Loan, it is not going to help your chances of getting the loan and will have an interest rate that is higher than the prevailing market standards.
The lending institutions usually approve only those co-applicants who live together or are legally bound to each other.
You can’t apply for a Home Loan along with your minor child as a minor can’t get into a legal contract and can’t be held accountable in case you default on the loan or if there are any issues with repayment.
Having a co-applicant can be beneficial for you. However, when you have a co-applicant, ensure that you have a clearly framed Legal Liability agreement in place between all the co-applicants to avoid any unnecessary hassles in the future.
Also, it is important that the main applicant and the potential co-applicant(s) read and understand all the terms and conditions before getting into a contract to safeguard the interests of all the involved members.
Also Read: How to Assess Your Home Loan Requirement?
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