[Explained] How To Take A Home Loan With A Woman As The Primary Borrower Is Beneficial For You
How to take out a home loan with a woman as the primary borrower is beneficial for you.
Women take larger home loans, according to a guide to refinancing home loans in 2021 by BankBazaar. In FY20, the average size of mortgage tickets taken by women was Rs 29.78 lakh. In FY21 the number increased slightly by 7.41% to Rs. 31.98 lakh. This increase is due to the changes necessitated by the pandemic, people needing space and privacy, and to achieve their aspirations of home ownership.
More and more women are becoming borrowers because many working women now regard home ownership as a high priority. Women borrowers are also encouraged to become homeowners through perks such as lower mortgage rates and lower property registration fees.
In addition, joint home loans are also encouraged. Women are encouraged to register as co-borrowers so that loans can be used at lower rates, and overall loan eligibility can be increased for the co-borrower family as well.
Here’s a quick look at how it helps women be the top mortgage borrowers.
Improves the chances of the loan being sanctioned
Studies have shown that women tend to manage their credit better by ensuring full and timely repayments. Therefore, the presence of a female borrower or co-borrower can also improve the chances of getting the loan. A co-borrower with strong credentials such as a high credit score and stable income could strengthen your loan eligibility, making it easier for you to get sanctioned. Co-borrowing equally distributes the responsibility for repaying among all co-borrowers on a loan. This reduces the burden that a single borrower may experience and also lowers the risk of repayment.
Reduced interest rates
Women, whether primary or secondary applicants, get mortgage loans at lower rates than men. The difference could range from 0.05 percent (5 basis points) to 0.1 percent (10 basis points) in most cases. For example, if a male borrower is offered a home loan interest rate of 6.75% per annum, adding his wife as a co-applicant and co-owner of the property, the rate could drop to 6.65%. per year. The difference, while marginal, helps get lower Equivalent Monthly Payments (EMIs) and lower your interest expense over the life of the loan, which improves your cash flow. Let’s better understand this with the help of an example.
Suppose a male borrower receives a home loan worth Rs.40 lakh for a term of 20 years. Her EMI, with interest of 6.75% per annum, will amount to Rs 30,415 while the total interest expenditure will amount to Rs 32,99,494. However, once an eligible woman becomes co- applicant, the lender lowers the applicable rate to 6.65% per annum, and the effective EMI decreases to Rs 30,177 and therefore the total interest expense will drop to Rs 32,42,531. Therefore, the co-applicant has assured long term savings of nearly Rs 57,000.
Home loans to women as principal applicants are offered with a repayment term of up to 30 years or up to the age of 70, whichever comes first. For men, it could be 20 or 65, whichever comes first. For example, if the husband is 50 while the wife is 45, the bank will give them a repayment period of 15 years only if the husband applies for the loan alone. But if he adds his wife as a co-applicant and co-owner of the property, they will have 25 years of loan repayment term.
Stamp duty reductions
Stamp duty contributes to the overall cost of acquiring a property. A reduction of 1 to 2% is generally applicable on stamp duties for women home buyers. This means that if the property is worth Rs 40 lakh, the stamp fee it can save would be Rs 40,000 to Rs 80,000.
A solidarity real estate loan offers all co-borrowers the possibility of benefiting from a tax deduction for the payment of interest and principal. In accordance with Articles 80C and 24 of the Income Tax Act, all co-borrowers as co-owners of the property can benefit from a tax deduction of up to Rs. 1.5 lakh on the principal repaid and another Rs.2 lakh on the interest paid.
A woman as a primary mortgage applicant improves the chances of getting a larger loan. In addition, the government also encourages women to earn credit related grants through the Pradhan Mantri Awas Yojana (PMAY). According to PMAY, it is mandatory to have the name of a housekeeper to register the property. In addition, if a woman takes out a loan under this credit-linked subsidy program, she may receive an interest subsidy of up to 6%.
Adhil Shetty is a guest contributor. The opinions expressed are personal.