4 reasons why you should opt for a solidarity mortgage
For those who want to buy real estate, here are the reasons why opting for a solidarity mortgage would be a good thing.
Joint mortgage loans often present themselves as a pause for many mortgage applicants, especially those who are struggling to get approved on their own. Although in most cases it is not mandatory to have a co-applicant when applying for a home loan, it does not have one but several advantages. For those who are impatient to buy a property, here are the reasons why going for a joint home loan would be a good decision:
Overall loan eligibility improves
Insufficient income, low credit score, high debt to income ratio, etc. Often create barriers to the approval of the single applicant’s home loan application. In such cases, opting for a joint home loan can boost overall loan eligibility. When you add a co-applicant with a stable income, good credit rating, and satisfactory repayment capacity, your chances of getting loan approved increase. Since lenders consider the combined income of the joint loan seekers when deciding the loan amount, you can also qualify for a larger loan amount if needed.
Benefit from higher tax advantages
You can benefit from a tax advantage on the repayment of principal and interest under Articles 80C and 24b, respectively. While the principal repaid can be claimed up to Rs 1.5 lakh during a fiscal year, the repayment of interest can be claimed up to Rs 2 lakh during a fiscal year for independent properties. No limit has been put in place for the interest reimbursed for leased goods. By benefiting from a collective real estate loan, the co-borrowers can claim these tax deductions separately, provided that they are also co-owners of the property. Remember that simply being a co-borrower and not a co-owner of the property would deprive you of the associated tax benefits, even if you have contributed to the repayment of the EMI.
An additional deduction of Rs 1.5 lakh on interest payments made on mortgage loans taken out during the period from April 1, 2019 to March 31, 2020 has been introduced in the Union budget this year. This can be claimed beyond the Rs 2 lakh deduction available on interest payments made on home loans by first-time borrowers, thus increasing the total interest deduction to Rs 3.5 lakh as of during an exercise. Joint mortgage borrowers could claim this deduction separately.
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Attractive interest rate with a female co-applicant
You may qualify for a concessional interest rate on home loans if you apply for a joint loan with a co-applicant. Lenders typically offer concessional interest rates to women applying for a home loan, typically with an interest rate of up to 5 basis points (0.05%) below the applicable standard interest rate. However, keep in mind that some lenders may require the woman to be both a co-owner and co-applicant in order to qualify for the concessional interest rate on the mortgage.
Reduced stamp fees for women
Registering your property in a woman’s name, as a sole proprietor or co-owner, can help reduce stamp costs. Although stamp fees vary from state to state, some states generally have a stamp fee of 1 to 2% lower for women. Remember that stamp duty, registration fees and other expenses directly related to the transfer of ownership can be claimed as a tax deduction under Article 80C, with a maximum ceiling of Rs 1.5 lakh at during an exercise. Keep in mind that this deduction must be claimed in the same year in which these expenses were incurred.
(By Ratan Chaudhary, Head of Home Loans, Paisabazaar.com)
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