A co-applicant in a home loan means a Co-borrower of the loan. He is a person who applies for a loan along with the borrower and accepts the responsibility for repaying a debt along with the primary borrower.
Who can be a Co- applicant?
1) A Co-applicant has to be in blood relation to an applicant. He can either be a spouse (husband or wife), children (son or daughter), parents (father or mother) & siblings (brother or sister).
Banks do not encourage friends or distant relative as a co-applicant for a home loan.
Note: The income of only unmarried sister and daughter is considered for additional loan eligibility.
2) All property co-owners have to be co-applicants to the home loan.
3) Co-applicant can either be Salaried/self-employed/pensioner/housewife/student and even a company.
What should be the age of Co- Applicant?
A Co-applicant cannot be a minor. Eligible age for co-applicant is a minimum of 21years and maximum of 75 years.
Why add a co-applicant to the loan?
1) A loan co-applicant is mandatory with many banks.
2) A co-applicant so added becomes equally liable for repayment of the loan amount taken in case of default by the primary applicant.
3) It enhances the loan eligibility of the primary applicant.
4) In the absence of co-applicant, a guarantor is mandatory to the home loan who is required to repay the loan default if any by the so applicant, and hence should be financially eligible (income-wise). Guarantor’s KYC and financials are submitted along with that of an applicant.
Is it mandatory to consider co-applicants incomes?
It is not mandatory to consider co-applicants income. But it helps to increase the loan eligibility by simply adding a co-applicants earning.
What co-applicant’s documents are required?
If co-applicant’s income not considered for loan eligibility –
Only KYC (Pan Card, Aadhar card, residential proof) and passport size photograph.
If co-applicant’s income considered for loan eligibility –
KYC – Pan Card, Aadhar card, residential proof,
Passport size photograph and
Financial documents: – Salary slips+ form16+ bank statement – for Salaried & ITR copy, bank statement – for self employed.
Does a co-applicant receive tax benefits?
A co-applicant who is not a co-owner is not entitled to tax benefits on home loans.
Conclusion: All Banks/NBFCs has their own rules and conditions on Co-applicant.
Loan co-applicant seems to be mandatory with many banks but there are certain banks that prefer to process loan only in the name of primary applicant.