Can live-in couples get a joint home loan?

The reasons why banks do not lend money to buy homes to live-in partners and same sex couples...

A conversation in 7.12 Churchgate-bound ladies special suburban train aroused my curiosity. Though I am not a habitual eavesdropper, the jam-packed compartment was no help at all. Their talk was about buying a flat. Nothing unusual in two friends discussing home loans. I figured out that one them was a banker with whom the other lady was trying to know the nitty-gritty of home loan.

A few minutes later this conversation took an interesting turn. The young lady in question was looking to buy a flat with a loan to move in with her live-in partner. She wanted to check whether she could borrow jointly with him. Just when her banker friend was about to answer after the initial shock (which she tactfully contained) her station arrived.

But this set me thinking. As Indian society is opening up towards such relationships, it is imperative that such couples too get access to credit. But is it really happening?

Read on to know more...

Apnapaisa is a price comparison engine that allows consumers in India the ability to compare the EMI, interest rates and other fees for home loans, car loans, personal loans, business loans, credit cards, compare online quotes and features of life insurance, health insurance, car insurance, travel insurance and other general insurance policies in India.

Going by the experience with banks, I was apprehensive this situation would receive favour with lenders. Clearing my doubt on the matter, Harsh Roongta, CEO, Apnapaisa told me that co-borrowing can pose a problem for a small community of couples living together without marriage or even same-sex couples as these relationships are not socially or legally recognised and treated as two friends jointly applying for the loan.

"The reason for practicing restrictions in giving joint loans in such cases is that if some dispute arises between the two borrowers, the income stops getting pooled leading to problems in banks getting EMIs from the co-borrowers. Which is why banks do not give home loans to live-in couples," he told me.

Apart from that, lenders are very selective in granting loans when a co-borrower is involved; you cannot jointly take a home loan with just any person. An applicant along with his/her spouse, parents or own siblings can obtain joint home loans.

Some banks allow brothers to take a joint home loan provided they co-own the property. A co-owner is a person who has a share in the property and a co-borrower is one who is liable to pay the loan amount.

In some instances, banks insist that co-owners of the home are also co-borrowers in a joint loan.

No doubt, co-borrowing enhances your eligibility for the loan besides you also get to share down payment as banks calculate eligibility by clubbing your income with that of relatives. In such cases, banks/lenders insist on making the relative co-borrower.

The basic premise behind using pooled incomes for calculating eligibility is that both parties will actually combine their income and pay off all expenses (including the home loan installlment). However, banks are selective in extending this concept of income pooling to other relatives other than spouse, siblings, parents and children.

Besides eligibility, there is another benefit in the form of tax benefit which can be claimed by both co-applicants individually under Section 80 C and Section 24.

The condition in claiming the rebate is that co-borrowers should also be co-owners of the house. The joint account holders (owners of the property) can claim income tax benefits individually.

Housing loan benefits that fall under Section 80C and Section 24 of Income Tax Act makes each borrower eligible for a maximum deduction of Rs 1 lakh and Rs 1.5 lakh associated to principal repayment and interest payable on the home loan respectively.

However, if you are just a co-borrower of a loan and not a co-owner in the property, you cannot claim tax rebates.

On the other hand, if the co-owners are equal owners of a property but if the share of the loan is 2:1, the tax benefits can also be availed in the same ratio. Generally banks do not accept split EMI payments.

Now that I have had my fill on co-borrowing by live-in or same sex couples I am looking forward to meet my 7:12 ladies special co-passenger some day.