Maximise Tax Benefits for Joint Home Loan

Home loans have been instrumental in making the dream of owning a house more achievable. However, there are instances where significant funding is required or when an individual falls short of meeting the eligibility criteria. In such scenarios, considering a joint home loan can be the solution to secure the deal.

A joint home loan involves having a co-applicant, typically a close family member such as a parent, child, or spouse. Essentially, a joint home loan entails more than one applicant sharing the responsibility for repaying the loan.

Joint Home Loan Benefits

A joint home loan offers a multitude of advantages, each playing a pivotal role in facilitating your home ownership journey. Here's a detailed exploration of some key benefits:

Enhanced Loan Eligibility:

Before approving funds, lenders thoroughly assess your eligibility. With a co-applicant, your eligibility receives a substantial boost. Combining both incomes and creditworthiness amplifies your overall financial standing, thereby increasing the amount you can borrow. This collaborative approach empowers you to access more substantial financial support to realize your homeownership aspirations.

Lenders consider all applicants' incomes, allowing you to get larger loans for buying a home.

Favourable Home Loan Interest Rates:

Introducing a spouse or parent as a co-applicant in your joint home loan can yield another advantage – a potentially lower interest rate. Many lenders offer preferential home loan interest rates for female borrowers, typically ranging from 10 to 25 basis points (0.1% to 0.25%). Given the long-term nature of home loans, even a slight reduction in the interest rate translates to substantial savings over the loan tenure.

Enhanced Tax Benefits:

Opting for a joint home loan unlocks additional tax benefits for both applicants. This includes tax deductions on both the principal and interest components of the loan repayment. Some lenders give lower interest rates on home loans to women, usually between 0.1% and 0.25% less than the standard rate.By using tax benefits together, you can save more money on taxes, which can help with finances and encourage shared homeownership.

Also Read: Maximising Tax Benefits: Navigating the World of Joint Home Loan Ownership

The payment of the principal amount towards your home loan opens avenues for tax exemption under section 80C of the Income Tax Act, 1961, with a maximum deductible amount of INR 1.5 lakhs. Similarly, the interest component qualifies for deduction under section 24, with a maximum limit of INR 2 lakhs.

When you opt for a joint application and contribute towards the EMIs, both you and your co-applicant can individually claim these deductions while filing your income tax returns. Consequently, as a family unit, the combined tax savings towards both principal and interest payments amount to INR 3 lakhs and INR 4 lakhs, respectively.

However, to avail of these joint home loan tax benefits, specific conditions must be met:

Co-ownership of the Property:

It is essential that both applicants are registered as co-owners of the property. If the co-applicant is not listed as a co-owner in the property documents, they cannot claim tax benefits.

Co-borrower Status:

Merely being a co-owner does not suffice; both applicants must also be co-borrowers of the loan. This condition ensures that both parties contribute towards the EMI payments, making them eligible for tax benefits.

Completion of Property Construction:

Tax deductions can only be claimed from the financial year in which the construction of the property is completed. Deductions are not applicable for properties that are still under construction.

Choosing a joint home loan offers several advantages beyond tax benefits. Joint owners often leverage this opportunity to pre-pay the entire loan amount, also known as loan foreclosure, resulting in significant cost savings.

Additionally, joint applicants may also distribute the burden of the downpayment cost. Owners can save money by paying off the loan early, called loan foreclosure, when they own the property together. Before applying, make sure to check your co-applicant's credit history to ensure they are creditworthy. This step is crucial. It's worth noting that any default in EMI payments by your co-applicant can equally impact your credit score.

Therefore, diligent evaluation and mutual understanding are essential before embarking on a joint home loan journey.

It will impact your loan eligibility criteria should you apply for a loan in the future. Read the fine print and review the terms and conditions well before signing.

Also Read: What Can You Do To Improve Your Credit Score

With Godrej Capital's home loans, same-sex partners can achieve their dream and buy a home together. By applying for a joint home loan, they can secure a bright future for themselves and their families, free from discrimination. Everyone deserves equal access to loans, as affirmed by the recent Supreme Court ruling recognizing the fundamental rights of the LGBTQIA+ community. We're committed to creating a more inclusive society where everyone has an equal chance at homeownership.

When applying for a Home Loan, borrowers can use tools like the home loan EMI calculator to plan their finances better. Additionally, applicants can check eligibility using an eligibility calculator to ensure a smooth application process.

Disclaimer:

The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially.
The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements.
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