Planning to co-borrow a loan? Take note of these points

[] Want to increase the home loan amount by applying with a co-borrower? Make sure you are aware of the legal and financial implications.

Based on your monthly salary, you are eligible for a certain home loan amount. Therefore, banks often suggest that you apply with a co-applicant to increase your home loan amount. While this is a sure-shot way of increasing the loan amount, both borrowers must be familiar with the implications of entering this arrangement.

[] Difference between a co-borrower, co-owner, co-signer and co-applicant of a home loan

Co-borrowing is not akin to co-owning

Co-borrowing for a property does not make you a co-owner. The property belongs to the person under whose name it is registered. Even if you have been helping with the EMI payments, the property would not belong to you unless you are registered as a co-owner.

Each borrower is responsible to repay

Irrespective of whether you pay the regular EMIs or not, you are responsible for paying the EMIs and the loan, as and when the need arises. This would apply, legally speaking, even if the spouses get divorced or one of the co-borrowers dies.

Sale would require the agreement of all parties

This provision complicates the process for future sales. If the property were to be sold, both borrowers must agree as long as the loan is not paid off. Once the loan is paid off, the owner of the property would be free to dispose of it in the manner they deem fit.


How costly are home loans in India?

Housing loans have become expensive after the Reserve Bank of India (RBI) increased the repo rate by 190 basis points in May 2022. Currently, the repo rate stands at 5.90% and home loan interest rates are around 8.40-9%.

What is the repo rate?

The repo rate is the interest the RBI charges from banks to lend funds.

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