What is the Difference between a Co-Borrower and Co-Owner of Home Loan?

 

Did you know that you can apply for a home loan, even if you are not the primary borrower? You can be a co-borrower or a co-owner – what do these terms mean and what are their legal and financial implications?

Let us draw a detailed comparison between the two roles for better understanding.

 

Who is a co-borrower of a housing loan?

As far as the legal and financial ramifications of repaying the loan are concerned, the co-borrower plays a role as important as the primary borrower. Meaning, co-borrowers of a home loan have an equal responsibility in the repayment of the loan. If the primary borrower is unable to pay back the loan on time, the entire responsibility will fall on the shoulders of the co-borrower. It is important to note that –

        A co-borrower may not necessarily be the co-owner of the property

        A co-borrower will be eligible for tax benefits only if they are also the co-owner of the property

 

Who is a co-owner of a housing loan?

Co-owners of a housing loan are at par with the main borrower, not just in terms of the financial aspect, but they also have a legal share in the property. This naturally means that the co-owner of a property will also be the co-borrower and co-applicant of the loan since, in most cases, the lender will insist on it. Moreover, co-owners are eligible for tax benefits.

 

Comparing the two

Point of distinction

Co-borrower

Co-owner

 

 

 

Role

As the name suggests, a co-borrower takes a joint housing loan along with the primary borrower

A co-owner is at par with the main borrower as they have a legal share in the property being purchased

·         Property ownership

·         A co-borrower may or may not have a legal share in the property

·         Part ownership of the property belongs to the co-owner

·         Tax benefits

·         A co-borrower is eligible to claim tax benefits only if they’re also a co-owner

·         A co-owner home loan will be eligible for tax benefits

 

·         Is there any similarity between the two?

·         The two do have something in common. The point where both a co-borrower and co-owner meet is the repayment responsibility of the housing loan – each is as responsible for repaying the loan as the main borrower. This means that if the primary borrower fails to close the loan on time, both the co-borrower and co-owner will have to put in their funds towards timely repayment. Plus, the credit scores of both will matter and may play a huge role in availing low home loan interest rates.

 

·        Are you taking a housing loan? Maybe you’re a co-borrower or co-owner? In either case, it is essential to take a few steps that ensure a smooth repayment experience. Check your home loan eligibility and repayment capacity in advance and compare lenders to get the most market-beating interest rates.