Taking a joint loan to buy property is a pretty common thing that people do in order to lighten their financial burdens when buying property. Usually one takes a joint home loan with a trusted and close family member, like a parent, child, sibling or spouse.
There are many pros and cons involved in taking a joint loan, as well as some risk. It is important to know how a joint loan will affect any of your future financial endeavors.
Getting a joint loan is often easier than if you apply as an individual. However, there are some negative consequences involved. Here are the ways a joint loan can change your life:
1. Limiting The Amount of Future Loans
If you have a joint loan on your first or even second property, you will be able to get up to 90% margin of financing. However, when you apply a joint loan on a third property, you will only get a maximum 70% margin of financing. However, if you apply individually, you can get a maximum of 90% financing on up to 4 property loans.
2. Credit Ranking Linked With Your Partner
When you apply for a joint loan, your credit ranking will be linked with your partner. Therefore if your partner has a poor credit history, both of you may be denied a loan. Therefore, it is important that you are absolutely clear about your loan partner’s financial situation and standing.
3. Tax Free Loans
As Malaysians, we are allowed to enjoy a once in a lifetime chance to take a tax free housing loan. Any subsequent loans will be charged tax. This once in a lifetime tax exemption applies to joint loans as well. Meaning that if you take loans together, your partner and you only enjoy the tax exemption only once, but if you take loans separately, you will both enjoy the exemption as individuals, which is twice.