Key parameters factored in during the evaluation of your ICICI home loan application include the applicant's credit score, income, job profile and stability, age and existing monthly obligations. The level of importance of these factors tends to vary from lender to lender and case to case, depending primarily upon the credit risk matrix opted by the lender.
Improper documentation and/or failure to qualify for any of these set eligibility criteria can lead to the rejection of your loan application. Hence, to deal with or avoid rejection of your home loan application, looping in a co-applicant to avail of a joint loan can boost your overall loan eligibility as well as approval chances.
Let us understand the key aspects, benefits and drawbacks of going for a joint home loan by submitting an application for an ICICI home loan:
Vital aspects to keep in mind when taking a joint home loan application
Apart from the prerequisite of compulsory looping in of co-owners of housing properties to become co-borrowers of the home loan, other circumstances wherein looping in a co-applicant can boost the overall loan eligibility and increase overall approval chances for primary borrowers applying for ICICI home loan are- monthly debt obligations of primary applicant exceeding 50%-60% of income, risky job profile or employer profile, inadequate credit score, big loan amount, primary borrower close to or already retired, etc.
Hence, those facing difficulties in single-handedly availing home loans, especially at lower rates offered in the form of ICICI home loan interest rate, can go for looping in a co-applicant to get the joint home loan approved.
Also, when roping in a co-applicant for your ICICI home loan, prefer that the co-applicant is an earning member of your family, as this lowers the credit risk for the lender since the co-applicant becomes equally liable for the timely repayment of the loan.
Benefits of looping in a co-applicant to avail joint home loan
Boosts overall eligibility-
While contemplating to go forward with the decision of roping in a co-applicant, especially a woman in order to fetch lower ICICI home loan interest rate, prefer that they have their own income source coupled with a good credit score as well as satisfactory repayment capacity, as this would improve the overall ICICI home loan eligibility and approval chances. Given that the co-applicant becomes liable to make the repayment of the home loan, this lowers the overall credit risk for the lender, too, thus spicing up the chances of getting the loan approved.
On similar lines, as those approaching their retirement can have difficulty getting a loan approved, they can rope in a younger aged co-applicant to assist in getting the home loan approved along with lower ICICI home loan interest rate and longer tenure.
More tax benefits-
Primary applicants along with co-applicant(s) can independently avail the available tax benefits as per their contribution for repayments of interest and principal component of home loan. A tax deduction is available for a limit of up to Rs 2 lakh upon making the home loan repayment of interest component for self-occupied property under Section 24b and up to Rs 1.5 lakh in each financial year on account of the repayment of the principal component under Section 80C can be claimed by both primary and co-applicant of home loan. Hence, looping in a co-applicant for your home loan can result in higher overall tax benefits. But note that a condition is attached to availing of this tax benefit, wherein the co-borrower can be eligible to avail available tax benefits only in case he/she is also the co-owner of the involved property.
Lower rates for women applicants-
Many home loan lenders usually move forward to offer interest rate concessions to women co-applicants. A5 bps (0.05%) concession is offered to them vis-a-vis the rates applicable to other borrowers. Thus, looping in a woman co-applicant turns out to be a good move to fetch concessional rates. Lower rates would, in turn, help reduce the overall interest cost of the ICICI home loan.
Along with the option of availing a joint home loan for borrowers having difficulties in approval of a home loan, one can consider two more ways to boost eligibility. Firstly, they can pay a bigger down payment or margin contribution rather than contributing just the minimum of 10%-25% of the property's cost from their own pocket. Secondly, they can opt for a longer tenure, as this implies smaller EMI outgo and hence, a lower EMI to income ratio as well. Given that both these ways help to reduce the credit risk for the lender, those having slighter chances of home loan approval can spike up their home loan approval scope by attempting to contribute a higher down payment and/or chooser a longer repayment tenure. An overall higher home loan eligibility coupled with a good credit profile can also assist in availing better ICICI home loan interest rates, thereby enabling lower overall interest costs as well.
Drawbacks
Rigid eligibility criterion
The co-borrower of ICICI home loan can usually only be from the list of close relations specified by the lender. Different home loan lenders or banks have their own set of conditions pertaining to the relations acceptable by them for joint home loan applications. Lenders usually tend to allow only spouses or immediate blood relatives of a primary applicant to be co-applicants. Some lenders may also tend to hesitate or reject lending of joint home loans to cases like unmarried partners or siblings. For joint home loans being taken for co-owned housing properties, lenders or banks usually mandatorily require all the home co-owners to become co-borrowers of the home loan.
Possible rejection if co-borrower has no or poor credit score
Always keep in mind that when evaluating your joint home loan application, both primary borrower as well as co-applicants credit score, income, age, debt to income ratio etc., are factored in. If your co-applicants credit score is on the lower side, your joint home loan application may get rejected, as lenders would be hesitant to lend to those who have not displayed disciplined credit repayment behaviour, which has led to a poor credit score.
The lender for home loans tends to approve joint applications and even offer lower and lucrative ICICI home loan interest rates when they are satisfied with the repayment capacity of both primary borrower and co-applicant. Moreover, getting your home loan application rejected, irrespective of the reason behind it would lead to your credit score getting damaged. Sometimes, lenders can decide to price higher rates for you instead of rejecting your joint home loan in such cases.