Difference Between a co- borrower,co-owner, co-signer And co-applicant of a Home Loan

Introduction

You are eligible to apply for a home loan as a co-owner, co-borrower, co-applicant, or co-signer. Before choosing how you will put your name on the mortgage, it is crucial to understand the distinctions between these terms. It is even more critical to fully comprehend it and make an informed decision because each role will have different legal and financial responsibilities concerning repaying the mortgage. Below is what you need to know about each of these home loan jargon.

Co-owner of a home loan

Co-owners of a home loan have an equal legal interest in the property to the primary borrower. Banks and other lending organizations may also require co-owners of a home to sign up as co-borrowers of a loan. As a result, the co-owner of the property is typically also the co-borrower and co-applicant for the mortgage. But it’s crucial to note that not all mortgage co-applicants will also be property owners.

Co-borrower of a home loan

The co-borrower is just as crucial to repaying a home loan’s legal and financial repercussions as the primary borrower. Even though both parties share equal responsibility for loan repayment, the co-borrower will be solely responsible for making the payments if the primary borrower cannot do so for any reason. However, the co-borrower is only eligible for tax advantages on the mortgage if he is also a co-owner. A mortgage co-borrower is not required to be a co-owner of the property.

When requesting or accepting a co-borrowers on a home loan, there are a few things to keep in mind. These are listed below:

• Co-borrowers should be spouses or close family members.
• A minor cannot be a co-borrower.
• All loan repayment obligations pass to the co-borrower in the event of a payment default or the primary borrower’s death.
• If the primary borrower cannot make mortgage payments, the co-borrower will be responsible for doing so.

Co-applicant of a home loan

Along with the primary borrower, the co-applicant of a home loan is also accountable for repaying the loan. Even though some banks and financial institutions require that all co-owners of the property be co-applicants for the mortgage, this is not a requirement for all co-applicants. The chances of the primary borrower meeting the loan eligibility requirements can be increased by including a co-applicant. If the co-applicant defaults on loan, they will not have any claim to the property if they are not the co-owner, even though they are a co-applicant. Additionally, co-applicants who are not co-owners are not eligible for any tax breaks on the primary borrower’s mortgage payments.

Co-Signer of the home loan

If a primary borrower does not meet the requirements for a home loan due to a low credit rating, co-signers typically enter the picture. The co-signer must have a high credit rating because participation is required due to the primary borrower’s lower credit rating. A high credit score makes things easier to qualify for a mortgage and attracts more favorable terms and conditions, including lower interest rates.

The co-signer will be legally equally responsible for the loan repayments if the primary borrower defaults on payments, even though they will not be liable for the mortgage’s Equated Monthly Instalments (EMI). However, they won’t control the mortgage amount or be eligible for tax breaks on loan repayments. Additionally, they won’t have any ownership or legal claim to the asset they are co-signing for. Being a co-signer may also make it more challenging to get credit in the future because the loan will appear on their credit report and affect their CIBIL scores.

A co-owner, co-applicant, or co-borrower can be advantageous if you apply for a home loan.

• The increase in the eligible loan amount is one of the most apparent advantages of applying for a home loan with a co-applicant. Having a co-applicant significantly increases your potential loan amount by two times, provided the co-applicant has a consistent source of income, as the amount sanctioned for a home loan is directly proportional to your income.

• Fiscal Savings A co-applicant may claim deductions up to Rs. 1.5 lakh under section 80C. If the property is occupied within three years of taking out a home loan, a co-applicant may also be eligible for tax benefits under section 24B. Taxes can also be avoided on the sum paid for stamp duty and registration.