Joint Home Loan Management: Tips for Managing a Shared Loan with Your Spouse

Raj and Simran want to buy their dream home. They decide to apply for a joint Home Loan with equal ownership. Both Raj and Simran are earning individuals, which strengthens their application. With their combined income, they secure a loan amount of ₹90 lakhs at an interest rate of 9% for a tenure of 20 years.

Are you also dreaming of owning a home together with your spouse? You can now purchase a larger home as the combined income of both, you and your spouse's eligibility will be clubbed together to determine the loan amount and interest rate, significantly increasing the home loan eligibility amount. 

Also, when the home loan EMI is split between the two, the financial load of loan repayment will become lighter. In this guide, explore the various aspects you need to consider when taking on a shared loan with your spouse. Let's dive in!

Managing Joint Home Loan Repayments

When you and your spouse apply for a joint home loan, both of you become co-borrowers and share equal responsibility for repaying the loan amount. This allows you to combine your income and creditworthiness to secure a higher loan amount at favourable interest rates. Joint home loans also provide tax benefits under Section 24(b) and Section 80C of the Income Tax Act. 

However, managing a joint home loan can be challenging without the right knowledge and preparation. Read on to understand strategies to ensure smooth joint home loan management throughout the tenure.

Key Strategies to Consider to Manage a Joint Home Loan

1. Open Communication and Financial Planning

One of the keys to successfully managing a joint home loan is open communication between you and your spouse. It's important to discuss your financial goals, expectations, and responsibilities right from the start. This includes deciding on the loan amount, repayment tenure, EMIs (Equated Monthly Instalments), and how you plan to split the EMI payments. Also, allocate responsibilities for different aspects of loan management, such as tracking payment due dates, managing documentation, etc. 

2. Splitting Loan Repayments

When it comes to repaying the joint loan, you have several options for splitting the EMIs with your spouse. There are three common methods:

• Equal Split: Both spouses contribute an equal amount towards the EMI payment. 
• Proportional Split: EMI payment is divided based on each partner's income contribution. For example, if one partner earns 60% of the total income, they would contribute 60% towards the EMI payment.
• Custom Split: This method allows you to customise the EMI split based on your preferences and financial situation. 

3. Emergency Fund and Contingency Planning

It's important to build an emergency fund when managing a joint home loan. Life is unpredictable, and having a financial cushion can help you navigate unexpected expenses or disruptions in income. Set aside a portion of your monthly income dedicated to building and maintaining this fund. You can build an emergency fund with a high-interest Recurring Deposit.

4. Managing Credit Scores

Both you and your spouse's credit scores play a crucial role in determining your joint home loan eligibility and interest rates. It's essential to maintain good credit scores by paying all your bills and EMIs on time, keeping credit card utilisation low, and avoiding excessive debt.

5. Reviewing Loan Terms Regularly

As joint borrowers, it's crucial to review your loan terms periodically and make necessary adjustments if required. Keep track of changes in interest rates, repayment tenure, and any other updates from your lender.

6. Managing Documentation

Proper documentation is essential when managing a joint home loan with your spouse. Ensure that you have copies of all relevant documents related to the loan agreement, property ownership, income proof, and other supporting documents.

7. Insurance Coverage

Home loan insurance provides coverage in case of unforeseen circumstances such as critical illness, disability, or death. This ensures that the burden of repaying the loan does not fall solely on the surviving spouse.

8. Prepayment and Foreclosure Options

If you have surplus funds, you can consider prepaying a part of your joint home loan to reduce the overall interest burden. Before making any prepayments or opting for foreclosure, check with your lender about any associated charges or penalties.

Choosing the Right Lender for Joint Home Loan Management

Selecting the right lender is critical when managing a joint home loan. Look for a bank or financial institution that offers competitive interest rates, flexible repayment options, and excellent customer service. Ensure that the lender provides transparent terms and conditions and has a good reputation in the market.