5 Differences Between a Co-signer & a Co-Applicant You Need to Know When You Apply for a Housing loan
When applying for a mortgage, some banks and other lending institutions allow you to include a co-applicant or co-signer. If you’re a first-time housing loan applicant, you would want to know the difference between co-applicants and co-signers. This is because you can apply for a bigger loan than your income can repay.
However, you are required to get a co-applicant to boost your ability to repay, which increases the chances of approval.
A co-signer is a guarantor and doesn’t have many rights and responsibilities over the borrowed money like a co-applicant. The co-applicant and co-signer helps the primary borrower get a home loan with favorable terms.
You’ll increase your loan eligibility by including a co-applicant and co-signer in your application.
Key Differences between Co-applicant and Co-signer you Should Know
Differences in Loan Repayment
The primary borrower carries the responsibility of repaying a housing loan. You can use your family members as co-applicants. However, your co-applicant will be involved in repaying the loan. As you pay your EMIs, your co-applicant will also make the monthly payments to cater for the principal amount and interest rate.
If you add a co-signer during the loan application, such an individual will not participate in loan repayment. But in case anything happens and you default your loan as a primary borrower, your co-signer is liable for the loan repayment.
Property Ownership Differences
A co-applicant pays EMIs just like the primary borrower. Therefore, a co-applicant has a legal right to share the property bought through a housing loan. In addition, a co-applicant brings tax benefits that come with a mortgage.
On the other hand, a co-signer doesn’t have any share on a property bought using a home loan and does not avail of any tax benefit associated with a home loan. However, including a co-signer in your loan application enables you to get a home loan at favorable terms.
Conditional Differences Between Co-applicants vs. Co-signer
Do you intend to include a co-applicant in your home loan application? You may choose your spouse to be part of it. Many lending institutions and banks will use certain conditions when children and parents seek joint loan approval.
On the other hand, a co-signer can be your friend or a family member with a solid income and a good credit score during a home loan application.
Significance Differences During Loan Application
You will become less eligible for a home loan when you’re the primary borrower with a low credit score. However, you’ll be eligible for a home loan if you include a co-signer with a decent income and a high credit score rating during your application.
On the other hand, a co-applicant enables you to qualify for a higher loan amount.
Make sure you get a housing loan EMI calculator and find the amount you qualify for before applying. If the loan amount you need is more than you qualify, get a co-applicant and co-signer. That way, you will access the huge amount required to get the home of your dreams.
Home Loan Burden and Low-Interest Rate Differences
If you get a co-signer with a high credit score, you’ll get a home loan with the lowest interest rate as a primary borrower. But a co-applicant helps the primary borrower reduce the burden of a home loan.
Remember, co-applicants pay EMIs like the primary borrower, sharing the loan repayment burden. So, you can negotiate on interest rates and equated monthly installments with your lender to get favorable loan terms if you include a co-applicant and co-signer during the loan application.
Conclusion
Get a co-applicant and a co-signer to enhance home loan approval. When your credit score is lower, your loan application can be rejected. You should include a co-signer and co-applicant with a stable income and credit score.
Use a housing loan EMI calculator to determine the amount you qualify for before you submit your loan application. That helps to reduce the chances of loan rejection.