When applying for a home loan, you must understand various terms that could make your buying journey easier. Home borrowers often tend to get confused between being a co-applicant, co-borrower, co-owner and a co-signer. If you are on the lookout for buying the home of your dreams and are considering to be any of the above, then read this blog to understand these four terms in detail to ensure that you don’t end up in financial trouble in the long term.
- Co-borrower of home loan explained
Being a co-borrower of the home loan means that you share the loan burden with the primary loan applicant. Your credit eligibility will be assessed to determine the loan eligibility and in case if the primary applicant fails to repay the loan due to death or default, you will have to pay the EMIs. A co-borrower may not always be the co-owner of the house but can enjoy the tax benefits along with the primary applicant. It is important to note that a minor cannot be a co-borrower for a home loan. The co-borrower cannot enjoy tax benefits if he is not the co-owner of the property.
- The co-signer of a home loan explained
Becoming a co-signer of the home loan means you take full responsibility for repaying the loan in case if the primary applicant fails to do so. The co-signer does not have any right on the property and mainly comes into the picture when the score of the primary applicant is not enough to get the loan sanctioned. Once you sign the agreement, you cannot remove your name till the time the loan amount is paid in full. It is important to know that a co-signer is not liable to pay the loan EMIs, but the outstanding amount in case the primary applicant defaults. Co-signer does not enjoy any tax benefits
- The co-owner of home loan explained
Becoming a co-owner of the home loan entitles you to gain a share in the property along with the other applicant. The co-owner is also the legal owner of the property and assumes full responsibility for the loan repayment to enjoy tax benefits. Co-owners are usually co-applicants of the home loan, but all co-applicants may not be the co-owners of the property.
- Co-applicant of home loan explained
Being a co-applicant of a home loan means you apply for the loan along with the primary borrower, fully sharing the responsibility of loan repayment. Having a co-applicant improves the chances of loan approval. If you are the co-owner of the house then you are entitled to enjoy the tax benefits.
Things to keep in mind:
- Co-signer is only liable to pay the home loan if the primary borrower defaults on his part and he may also be at the risk of getting his credit score impacted
- Co-owner shares the same legal liability as that of the primary applicant
- Banks require all co-owners to be the co-applicants
When you apply for home loan along with a primary applicant, it is imperative that you keep the above difference in mind as not being clear about the concepts may land you in legal and financial trouble in the future.