What No One Tells You About Joint Home Loan?

Buying a home is dream come true for all of us. The first home that we buy gives us an immense sense of achievement and independence. However, the decision to purchase a house is filled with apprehensions about repayments, tenure and how to go about looking for the most economical loan option available.

To facilitate home ownership, the government gives tax benefits under two heads of the IT Act, 1961

• Under Section 24b – Deduction on interest on home loan for self-occupied property up to Rs 2 lakh.
• Under Section 80c – Deduction on repayment of principal amount on home loan up to Rs 1.5 lakh.

A joint home loan not only allows you to share your debt burden but also allows you to extract maximum benefits offered by the IT Act.

Let’s check out the various aspects associated with joint home loan in detail –

Financial Benefits of Joint Home Loan

• Increased loan amount: One of the primary benefits of a joint loan is that it increases the borrowing capacity of the prospective home buyers. If X and Y want to take a joint loan, then the amount to be disbursed will be determined by their collective earning capacity. Therefore, it leads to a significant increase in the amount that can be lent for purchasing a home.

• Increased tax benefits U/S 24b and U/S 80C: Each individual is entitled to a tax benefit of Rs 2,00,000 U/S 24b and Rs 1,50,000 U/S 80C. If you take a joint home lone the tax benefits double as both co-owners can claim deductions individually, subject to the share in property. For example, Mr. X and his wife Mrs. Y take a joint home loan with 50:50 ownership, then the cumulative tax benefit will go up to Rs 7, 00,000 lakh.

Number of applicants

A joint home loan can be taken by a maximum of six persons. A co-borrower may or may not be the co-owner of the property. However, the banks usually recommend a co-borrower to also be a co-owner of the property.

Finding co-borrowers

• Married couples – It is a perfect arrangement for lenders. The couple is at liberty to decide if they both want to be co-owners or if one of them wants to be a co-borrower.

• Father and Son – In case of a father-son duo opting for a joint loan, lenders take into account if the son is the sole heir or not. In case siblings exist, then they insist on the son being the primary owner.

• Father and Unmarried daughter – In this case, lenders insist on the daughter being the primary owner of the property.

• Mother and Unmarried daughter – They are entitled to seek a joint home loan, but like in the case of father and unmarried daughter, lenders would prefer naming the unmarried daughter as the primary owner.

• Brothers – They are entitled to a joint home loan only if they are co-owners, are living together, or are expected to live together in the property to be acquired.

PaisaBazaar’s food for thought

To avoid dispute on loan repayment, we recommend you to insist your lenders to attach an addendum to the loan documents stating that each borrower’s liability to repay is limited to the extent of his share of the loan amount.