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I opted for a home loan last month wherein the bank refused to take my mother as a co-applicant as she is 65 years old. So I had to convince my cousin to be a personal guarantor.
I have few questions regarding the same.
- Shameem Khader
1. I will be the one who will be paying the entire EMI. Am I eligible for the tax benefits for the entire amount?
Yes, you will be eligible for the full tax benefits.
2. Can my cousin too claim the tax benefits?
No.
3. Will my cousin have a share in the property or can she claim to be a co-owner?
Your cousin cannot claim any share in the property simply because he is a guarantor on the loan. He is not a co-owner of the property.
However, if you default on your payments, the bank can recover the money from your cousin as he is the guarantor. Then your cousin can take the same action (as the bank could have taken, such as forcing the sale of the property) against you/ your property for recovery of the amount paid by him to the bank.
But, even under these circumstances, he cannot become the owner of the property; he can only force the sale of the property to recover her money.
4. What is the difference between personal guarantor/ co-applicant/ co-borrower?
When two people jointly apply for a loan, they are co-applicants. When the loan is granted on that basis, the co-applicants are converted into co-borrowers.
Legally, the co-borrowers are responsible for the payment of the loan. In case of default or death, the bank can proceed against either of the co-borrowers for the full amount of loan.
Guarantors are not borrowers themselves. They just stand to take over the loan when the borrower defaults. In your case, your cousin is a guarantor. This means he cannot pay the loan or the bank cannot hold any charge against him unless you default and the bank calls you a defaulter.
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