Who Can be a Co-applicant for a Home Loan?

When applying for a home loan, most of us are concerned about whether our home loan application will be approved by the lender or not. However, you can make a difference and increase the chances of home loan application approval by including a co-applicant.

This blog will focus on understanding co-applicant meaning in detail, and who can be a co-applicant in a home loan. Let’s start.

Who is a co-applicant?

A co-applicant is a person who applies for a home loan along with the primary borrower. The co-applicant in loans shares the same responsibility as the primary borrower and is equally responsible for the timely repayment of the loan amount. In case the primary borrower is unable to repay the EMIs, the entire burden falls on the co-applicant.

Who can be a co-applicant?

Please note that only specific persons who meet the lender’s home loan eligibility criteria can become a co-applicant in the home loan application. To qualify as a co-applicant in a home loan, the person should be a close family member and should have an equal stake in the house property, meaning, both the primary borrower and co-applicant should be the joint owners of the property.

Also, the co-applicant should have a good credit score and a stable income source to be able to make EMI payments. The co-applicant can contribute equally towards making EMI payments along with the primary borrower and take advantage of the tax deductions offered in Income Tax Act.

What does the co-applicant do?

As mentioned earlier, the co-applicant or the co-borrower in a housing loan is equally responsible for timely repayments of the home loan along with interest costs.

However, you should note, the co-applicant is not responsible for making EMI payments in the first place. In case, the primary borrower fails to make the EMI payments or defaults, then the entire responsibility of home loan repayments falls on the co-applicant. In short, the role of co-applicant is of an obligant, meaning the person who promises to pay the sum in the occurrence of certain events.

Who can apply to be a co-applicant on a home loan?

There are certain rules on who can be a joint applicant for a home loan. The first rule states- the co-applicant should be the joint owner of the property. Second, only the following relations are approved to become a co-applicant in a home loan:

• Husband and wife
• Son and father
• Son and mother
• Unmarried daughter and father
• Unmarried daughter and mother
• Son and unmarried daughter along with their parents
• Two or more blood-related brothers

You should note, brother-sister, sister-sister combination, relatives, friends, and minors cannot be co-applicants in a home loan.

Third, and the last criteria, the co-applicant should have a stable income source and meets all the home loan eligibility criteria. The co-applicant should be in a position to take full responsibility for the home loan repayments as and when required during the loan tenure.

Things to keep in mind while applying for a home loan as a co-applicant

You should have a good credit score: Before applying for a co-applicant, ensure you have a good credit score and meet all the lender’s prescribed eligibility criteria. In case, if the home loan application is rejected, it will impact your credit score and creditworthiness.

Repayment responsibility: You should sign the loan documents as you will be equally responsible for repaying the entire loan amount. If you are planning on sharing the EMI burden, you can make use of the home loan EMI calculator along with the primary borrower so that the resulting obligation is suitable to both of you.

Read the terms and conditions of the loan document: Before signing the loan documents as a co-applicant, read the terms and conditions, be aware of different charges and penalties, and raise questions if you have any doubt.

Your credit ratings can get impacted: Your credit score can get affected if the primary borrower defaults on home loan payments and you are also unable to keep up.

Wrap Up

Becoming a co-applicant is a huge responsibility and one should choose to become a co-applicant only after considering factors like financial stability, loan affordability, long-term financial goals, and other risk factors. However, having a co-applicant in a home loan is beneficial and one can avail of numerous benefits.