Pros and Cons Of A Joint Home Loan
- celinekann320
- Apr 26, 2021
- 3 min read
The Benefits Of A Joint Home Loan
Buying a house can be a big step, but it’s also a significant financial hurdle for many people.
If you want to buy the home you love, you’re going to need to find a bank that loves your finances enough to give you a suitable loan. That’s where a joint loan application can really help.
A joint home loan takes into account the combined income of the individuals applying for the loan.
Since banks have limits on the total amount they can lend you (which is generally based on your income level), combining two incomes can significantly increase the total amount you can ultimately borrow.
This increased purchasing power is one of the REAL benefits of applying for a joint home loan.
It not only means you now have the opportunity of being approved for a higher loan amount, it increases the chances of being approved for a smaller amount!
You see, your combined income is now so much higher than the bank's threshold.
As an added bonus, you’re also sharing the incidental costs of purchasing a house such as taxes, downpayment, and fees with a partner.
Pro 1 – Combined income increases home loan budget
Pro 2 – Easier loan approval thanks to joint income
Pro 3 – Shared entrance and purchase costs
The Downsides Of A Joint Home Loan
Like most things in life, the choice of a joint loan does come with some sacrifices.
A credit check (CCRIS or CTOS) is an important part of any home loan application, and when it comes to a joint loan – that’s double the credit records to check.
If your joint applicant has a poor CCRIS record, it will impact your chances of being approved for a joint loan even if yours is sparkling clean.
Another downside is the access to first-time buyer initiatives.
There are a number of such initiatives in Malaysia, offering financial incentives to homebuyers looking to get onto the property ladder for the first time.
If you access a joint loan for your property, there’s the chance that you might forego any opportunity you have to both benefit from first-time buyer initiatives.
That means two of you step onto the property ladder, but potentially only one of you gain access to a financial incentive.
A further financial incentive to consider is the Real Property Gains Tax (RPGT) exemption.
RPGT is a tax charged upon the profit gained from the sale of qualifying properties in Malaysia, currently those valued over RM200,000.
Malaysian citizens are offered a once-in-a-lifetime exemption from this tax.
If you’re part of a jointly owned house, one party in the agreement may essentially lose this benefit at the point of sale without gaining the financial reward.
Another point to recognise is how joint loan eligibility works for non-family members.
Financial institutions tend to be slightly more cautious about approving loans between friends, rather than husband and wife, or parent and child.
That’s based on the greater chance of friends deciding to travel their own directions in life, leaving a strained joint loan agreement between them.
Con 1 – Credit records of all applicants assessed
Con 2 – Lose access to potential first-time buyer initiatives
Con 3 – Lose access to potential RPGT exemption
Con 4 – Non-family loans assessed more critically
Source: Property Guru
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