Home Banking Co-applicant in a home loan: How to go ahead about it?

Co-applicant in a home loan: How to go ahead about it?

A home loan is possibly the most significant debt you can incur. It is a high-value loan that can last up to two decades and requires the borrower to pay a significant portion of their monthly income in the form of an EMI. Furthermore, before approving this type of loan, lenders must take into account a number of factors. Considering the high-value amount, taking out a LIC home loan on your own may not be a wise decision. However, there is a simple solution that can help applicants get approved for a home loan without adding all the stress of managing it alone which is including a co-applicant in the home loan application. 

Loan co-applications are nothing new. People have been doing this for many years and will continue to do so in order to obtain loans quickly. Personal loans can now be obtained with the help of a co-applicant. Even, people have been applying jointly with their partner, son, or daughter for a home loan. Having a co-applicant does make it easier to get a LIC home loan, but what does onboarding a co-applicant mean? Here’s everything else you should know about a co-applicant if you’re looking to apply for a personal loan or a home loan.

What do we mean by a co-applicant?

A co-applicant is a person who is named in a LIC home loan application alongside the main applicant, also known as the borrower. 

While there is no legal requirement to have a co-applicant when applying for a home loan, having one can improve your chances of getting your home application approved especially if it is a higher loan amount you have applied for. A co-signer can help a primary applicant get better loan terms and LIC home loan interest rate. In some cases, a co-applicant may be considered secondary to the primary applicant. One must know that a co-applicant is not the same as a co-signer or guarantor in terms of loan rights. They are rarely associated with the collateral. As a result, a co-signer serves as the borrower’s backup payment source.

When you apply for a home loan with a co-applicant, the lender considers both applicants’ incomes. Furthermore, when you apply with a co-applicant, your loan amount is increased because the incomes of both applicants are combined. However, when applying for a home loan with a co-applicant, borrowers must be aware of certain terms and conditions. 

Who is eligible to be a co-applicant?

The requirements for being a co-applicant differ depending on the bank. As previously stated, a co-applicant is an individual who shares equal responsibility for repaying a home loan. Most lenders require that the co-applicant be an immediate family member or blood relative. However, When a home loan is taken out with a co-applicant, lenders typically allow the following combinations. 

Husband and wife: This is the most common and acceptable condition. Both parties can jointly own the property, and their incomes are considered during eligibility thus, increasing the chances of loan approval.

Father and Son/s: It is possible only in case the son is the only male child in the family. In this combination, the lender considers the incomes of both parties and the names of both appear in the property document as legal owners. In a LIC home loan, either party can be named as the primary owner. If a family has more than one son and wishes to apply for this combination, the father cannot be listed as the primary owner. This is attributed to inheritance issues in the event of the father’s death. 

Father/Mother and unmarried daughter: If the co-applicants are a father/mother and an unmarried daughter, the property must be in the daughter’s name. In addition, the income of the father/mother is not considered in this combination. 

Brothers: Two brothers can be listed as co-applicants on a home loan if they share the same residential address at the time of application and intend to continue living together in the new home they are purchasing on loan. In this case, lenders may require the brothers to be co-owners rather than just co-applicants. 

Now that we know who can be a co-applicant in a home loan, let’s look at some of the combinations which aren’t acceptable:

  • Two sisters
  • Sister and brother
  • Father and daughter who is married
  • Mother and daughter who is married
  • Couples who are living together
  • Friends
  • Cousins

What is the role of the co-applicant?

If the applicant fails to repay the LIC home loan, dies, or otherwise refuses to enter into the agreement, the co-applicant assumes full responsibility for the loan.

Analysts believe that a co-applicant technically becomes a co-borrower, and as such, he or she is responsible for loan repayment and other obligations. If the borrower fails to repay the loan, the co-applicant is held equally responsible.

Even if the primary borrower has insurance, the co-applicant will be liable for repayment if the primary borrower dies.

Benefits of Having a Co-applicant

Some advantages of having a co-applicant, particularly when applying for a home loan, are as follows:

  • When both co-applicants have a good credit score and a steady income, the loan is more likely to be approved by the bank
  • Low LIC home loan interest rate are offered by home loan providers to co-applicants who are financially stable and have a good credit score.
  • The co-applicants, who are also co-owners of the home, are eligible for a number of tax benefits.
  • Co-applying for a LIC home loan improves the creditworthiness of both applicants.

So we are saying, 

Your income may also be insufficient to qualify for a loan or you might have a lot of dependants in your family that are making your loan application rejected. Onboarding a co-applicant can allow you to qualify for a higher amount. Having a co-applicant in a home loan can relieve the burden of the entire repayment responsibility and be a great source of relief. You will also benefit from a higher loan approval rate, increased loan amount eligibility and reduced LIC home loan interest rate, and tax benefits for both parties. 

However, one should understand that the terms co-applicant and co-owner should not be used interchangeably because a co-applicant does not have to share ownership of the property. However, he or she is responsible for any loan-related issues.