Four terms related to home loans that are often misunderstood are co-borrower, co-owner, co-signer, and co-applicant. On the surface, the terms may seem similar or maybe you can make out the apparent difference between each but if you are to be engaged in any of the above roles, you need to have a clear idea of what you’re getting yourself into, lest you’re caught off-guard at the time of loan repayment.

Who is a Co-Borrower of a Home Loan?

Under a Joint Home Loan, multiple people can share the loan burden. A co-borrower is an additional borrower whose name will appear on the loan documents and whose credit history will also be used for loan eligibility. Consequently, he will be equally obligated to repay the loan amount.

Who is a Co-Owner of a Home Loan?

A co-owner is an individual who assumes ownership of an asset or property in proportion to what has been settled in the ownership agreement. Consequently, the co-owner of a home loan will need to assume responsibility for loan repayment if they wish to enjoy home loan tax benefits.

Who is a Co-Signer of a Home Loan?

A co-signer is an individual with a good credit score who takes surety for the borrower of a home loan to repay the loan in case of any defaults on the borrower’s part. A co-signer cannot remove themselves from their position once they have agreed for surety and also risks marring his personal credit score.

Who is a Co-Applicant of a Home Loan?

A co-applicant is an individual who applies for a home loan along with the primary borrower. Co-application of home loan is usually done to improve the Joint Home Loan eligibility where the co-applicant’s income is used to supplement the income of the borrower.

Difference between the Four Parties

Categories Co-Borrower Co-Owner Co-Signer Co-Applicant
Definition A co-borrower is an individual who takes a joint loan along with the primary borrower A co-owner has a legal share in the property for which the loan is to be taken A co-signer signs the home loan application along with the primary borrower mainly to improve his credit standing A co-applicant applies for a home loan along with the principal borrower
Loan Burden A co-borrower is liable to share the responsibility of loan repayment A co-owner is liable to share the loan burden A co-signer, though is not responsible for paying the EMIs, he or she is liable to repay the outstanding loan amount in case of defaults on the borrower’s part Co-applicants have a shared responsibility towards loan repayment  
Tax Benefits Cannot enjoy tax benefits if he is not a co-owner   Entitled to enjoy tax benefits Not entitled to avail tax benefits Can enjoy tax benefits provided he or she is also a co-owner

Important Points to Keep in Mind

  • Banks require all co-owners to be co-applicants, but the reverse may or may not be true
  • The legal liabilities of a co-owner and the primary borrower are the same
  • The co-signer’s liability towards home loan payment only arises if there are any defaults on part of the primary borrower
  • A co-signer may be at risk of impacting his CIBIL or credit score

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