Lending institutes usually give an option to take a joint home loan with as many as six co-applicants, as these are big ticket-size loans. Even though there are benefits of taking a joint home loan, it comes with its own set of pros and cons.
People prefer opting for a joint home loan because they have a chance to get additional concessions, along with approval for a bigger loan amount and also increased tax benefit. The loan amount difference between talking an individual loan, and talking a joint loan, can be up to Rs 20 to 30 lakhs. Most banks also give lower interest rates to women applicants.
Having said that, taking a joint home loan also comes with certain drawbacks. Home loans are secured loans and with the EMI (equated monthly installment) option payback of the home loan also becomes convenient for the borrowers, over a long period of time.
Here are some of the drawbacks of taking a joint home loan with your spouse;
Limited share of the property: If either of the co-applicants dies without a will, and the surviving spouse is only a co-applicant, he/she will only get one-third share of the property as a legal heir. This is because, in the case of property or assets, in the absence of a will it is split among parents, wife, and children of the deceased.
A divorce between the spouses: Loan repayment usually become a sore subject, in case two people who have taken a home loan together plans to separate or split up. For instance, if the wife in a joint home loan is the co-applicant, and the husband stops paying the EMIs after a divorce, the burden of repaying of the entire loan falls on the wife. This happens without the benefit of ownership of the property. Hence, to stay clear of this, experts suggest applicants can sign an agreement mentioning each partner’s share of loan liability, to avoid differences as such in the future.
Death of a spouse: In the case of death of either of the co-applicants, the burden of clearing the dues falls entirely on the surviving partner. The full repayment then needs to be done by the surviving applicant. In the case of non-repayment of the loan, the bank/lender can even seize the assets from the applicant.
Credit score and Eligibility: Additionally, in the case of a joint home loan if any one of the partners (as joint applicants) refuses to pay the home loan EMI, the credit score of both applicants is affected equally. Similarly, in case of a default in paying EMIs, both the partners will be impacted equally and it will lower the eligibility for a loan in the future for both of them.