Ways to remove a co-applicant from Home Loan
24 July, 2023
A Home Loan is a type of loan that is used to purchase or construct a home. It is a significant financial commitment that requires careful consideration and planning. Home Loans are typically offered by banks and financial institutions and are secured against the property being purchased. The loan amount, interest rate, and repayment terms vary depending on the lender and the borrower's eligibility criteria.
Home Loans can have several benefits, including tax benefits, increased eligibility with a co-applicant, and the ability to own a home without having to pay the full amount upfront. However, it is important to remember that a Home Loan is a long-term commitment that requires regular repayments. Before applying for a Home Loan, it is essential to assess your financial situation, calculate your eligibility, and choose a lender that offers the best terms and interest rates.
It is common for people to apply for a Home Loan with a co-applicant. Let's first understand who is a co-applicant in detail.
Who is a co-applicant?
A co-applicant is someone who applies for a Home Loan along with the primary applicant. The co-applicant shares the responsibility of repaying the loan and is equally liable for any defaults or delays in payments. However, the co-applicant should have a stable source of income and a good credit score to be eligible for a Home Loan.
In the event of a default, the lender can take legal action against both the primary applicant and the co-applicant.
Having a co-applicant on Home Loan documents has several benefits. Firstly, it increases the loan eligibility as the income of both the primary applicant and the co-applicant is considered while calculating the loan amount. Secondly, it helps share the financial burden of repaying the loan. Despite the several benefits of having a co-applicant for a Home Loan, in some situations, you may have to remove them, such as separation, death, etc.
Can a co-applicant be removed from a Home Loan?
Yes, a co-applicant can be removed from a Home Loan. The process requires the consent of both the primary applicant and the co-applicant. The lender may also have certain conditions for removing a co-applicant from the loan. Here are some ways in which your co-applicant's name can be removed:
Request a novation
One option is to request a novation from the lender. Novation is a legal process that involves replacing one party with another in a contract, in this case, replacing the co-applicant with another person or with only the primary applicant. Before requesting a novation, check your loan agreement to see if it allows for it. Some loan agreements may have restrictions on novation or may require the consent of all parties involved.
To request a novation, you will need to provide certain documents to your lender, including a written request for novation, a copy of the original loan agreement, and any other relevant documents that your lender may require.
Your lender may require a valid reason for novation, such as a change in marital status, financial difficulty, or any other reason that makes it necessary to remove the co-applicant from the loan. Make sure to provide a clear and concise reason for the novation in your written request.
If you are replacing the co-applicant with another person, make sure that they meet the lender's eligibility criteria for a Home Loan. If you are removing the co-applicant and becoming the sole borrower, make sure that you can afford the loan payments on your own.
After submitting your written request and necessary documents, wait for your lender's response. They will review your request and may require additional information or documentation. If your request is approved, they will provide you with a new loan agreement that reflects the changes.
Prove your eligibility
To prove your eligibility to remove a co-applicant, you will need to provide certain documents to your lender, including proof of income, proof of assets and a good credit score. You will have to show sufficient income by submitting your salary slips and bank statements. You may have to submit additional documents that show you are capable of repaying the loan. You may also need to provide a valid reason for the removal, such as financial problems for the co-applicant. Many lenders will ask for evidence. For instance, if your co-applicant has a poor credit score, submit a copy of their credit report. If they don't have the finances to make repayments, you can show their salary records.
If you want to include a new co-applicant, now is the time to add them to the documentation. If you are unable to prove your eligibility to remove a co-applicant, you can try negotiating with the lender. Some lenders may allow you to remove a co-applicant from the loan if you can provide a valid reason for doing so and show that you can repay the loan on your own. If you are unsure about the process, seek the advice of a financial advisor or a legal professional.
Consider refinancing the loan
If all else fails, you can consider refinancing your Home Loan to remove the co-applicant. In this case, you will have to apply for a new loan in your name only and use the proceeds to pay off the existing loan. This will remove the co-applicant's name from the loan.
Refinancing your Home Loan can be a significant financial commitment, so it's important to assess your financial situation before proceeding. Consider factors such as your credit score, income, and assets to determine if refinancing is a viable option for you.
Now you are ready to apply for a new loan with a lender of your choice. Make sure to choose a loan amount that covers the outstanding balance of your existing loan and any additional costs associated with refinancing. Once your new loan is approved, use the proceeds to pay off the outstanding balance of your existing loan. This will remove the co-applicant's name from the loan and make you the sole borrower.
If you are looking for a Home Loan, HDFC Ltd.* could be your ideal choice. Applying for a loan is easy and convenient. You can get low-interest rates. We offer flexible repayment options and different time periods to choose from. We have various types of Home Loans available, such as Top Up Loans, Home Improvement Loans, and Home Extension Loans.
Read more about Home Loan Procedure To Apply For Home Loan
Apply for a Home Loan with the HDFC Bank by clicking here today!
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Loan at the sole discretion of HDFC Bank Limited. Loan disbursal is subject to documentation and verification as per Bank's requirement. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.
