Taking a loan on a property can be a good way to arrange funds for a major financial need. But in case of an individual application, it may depend on the income, credit profile and repayment capacity of the person. Adding a co-applicant can sometimes help the application, especially if both applicants have good finances.
Before applying, it’s important to understand loan against property eligibility for co-applicants and how lenders may assess both borrowers. Lender eligibility criteria will vary so knowing the basics can help you better prepare.
What is a Co-Applicant for Property Loan?
A co-applicant is a person other than the main borrower who applies for the loan. Both applicants are generally responsible to repay the loan as per the agreed terms.
For example, the borrower may add their spouse or another qualifying family member as a co-applicant. The lender may take into account the income and financial obligations of both applicants when reviewing the application.
However, putting someone as a co-applicant does not mean that the loan amount will increase automatically. The lender will still assess the overall financial profile and the property being offered as security.
What is the co-applicant’s eligibility for loan against property?
When assessing loan against property eligibility, lenders may consider a number of factors on both applicants.
These can be:
- Income and age
- Credit Score & Payment History
- Loans and financial commitments presently outstanding
- Employment/business stability
- Details and ownership of property
- Ability to pay back in total
If the co-applicant has a good credit history and stable income, his/her financial profile can also support the application.
At the same time, the lender’s assessment can be influenced by the existing debts or a weak credit profile of any of the applicants.
Can a co-applicant increase the loan amount?
It can, depending on what the lender assesses.
If both the applicants are eligible and having regular income, the lender may consider their combined repayment capacity. This could mean a higher loan amount than a single applicant could qualify for on his or her own.
But the value of the property also plays an important role in a property loan. The lender will usually look at the assessed value of the property and applicable loan-to-value limits to decide on the final amount.
So, the financial profile of the applicants and the value of the property are important.
What factors determine co-applicant eligibility?
Ability to Repay and Income
One of the important factors that lenders look at is a steady income. Regular income of both applicants may help to provide more repayment capacity.
Credit History
The credit history of both applicants may be taken into account in the assessment. A good history of repayments can help the application, while any existing defaults or late payments can be a challenge.
Current Financial Obligations
Personal loan, car loan, credit card dues and other EMIs can impact the amount that a borrower can conveniently repay.
Age
The age of the applicants can also impact the loan tenure available. If tenure is shorter, EMI will be higher and overall eligibility may be impacted.
Details of Property
The lender will also consider the property being offered as security. Its location and condition, its title-deeds and its market value may be relevant to the application.
How does interest rate play into the application?
Another thing to consider before applying is the interest rate for the property loan.
The rate offered may vary depending on the credit profile of the applicants, income, loan amount, tenure, property details and policies of the lender. Having a co-applicant with a strong financial profile may help the overall application, but the rate you get depends on what the lender decides.
Don’t just look at the advertised rate, look at the total cost of the loan, including processing fees and any other applicable costs.
Can a co-applicant apply for a loan for a non-residential property?
Depending on the policy of the lender, borrowers can raise funds against eligible commercial or other properties. The eligibility for a non residential property loan may vary from a loan against a residential property.
If this is an option for you, see if the property qualifies, if both applicants can be included and what documents the lender requires.
Apply LAP EMI Calculator Before Applying
You might want to estimate your monthly repayment before you decide on your loan amount. You can use a lap emi calculator to get an estimate of the EMI you would pay based on the loan amount, interest rate and tenure you enter.
Try out different loan amounts and tenures and see what you can comfortably afford to repay each month. The calculator is an estimate only and the lender makes final decisions on loan terms.
What documents do joint applicants require?
The specific documents may differ between lenders but generally, applicants will need:
- Proof of identity and address
- Income papers
- Statements from the bank
- Property ownership papers
- Employment or business related documents
- Co-applicant documents
Having these documents ready can ease the application and verification process.
Final Thoughts
If you are applying with a co-applicant, then you need to be aware of the eligibility criteria for a loan against property even more. Having a co-applicant with a steady income and good credit profile could potentially help the application, but final eligibility is dependent on a number of factors.
Before you go for a property loan, do compare the property loan interest rate, do check the property requirements and do estimate your EMI with the help of a lap emi calculator. If you are looking for a non residential property loan, check the lender’s specific eligibility conditions also.
The right approach is to look at the finances of both applicants, the value of the property and the repayment plan before deciding how much to borrow.