Joint Home Loan A Wise Decision

Since buying a house is one of the most crucial financial responsibilities, a Joint Home Loan is a wise decision for a double income couple or for a parent and child.

There are various types of home loans and different financial institutions competing to offer you Home loan at  attractive rates. The interest on home loans in India is usually calculated either on monthly reducing or yearly reducing balance. Resident Indians are eligible for certain tax benefits on principal and interest components. The higher your income, the higher would be the sanctioned loan amount.

A high EMI to monthly salary ratio means that the possibility of you defaulting on a home loan EMI would be high. Therefore, a home loan EMI or Home Loan amount varies depending on borrower’s income, age and monthly expenditure. If your income is low or getting a home loan is difficult for you, Joint home loan is an option which you can take with your spouse or any other family member.

Joint Home Loan

Joint home loan is the most practical option as it lowers your burden and increases the tax benefits. You can take Joint home loan with your spouse or any other family member. A joint home loan can only be availed by minimum 2 and maximum 6 applicants. In majority of the cases it is allowed to a husband and wife or parent and child. In some case brothers are allowed to take the Joint Home Loans. However, Friends and sisters are not permitted to take a joint home loan.

It is advised to take a joint home loan if you are a married couple and both of you are working. This will maximize the Home Loans eligibility and will increase the tax savings. Joint Home Loan can be taken by Husband and Wife or Parent and Child. Banks however insist that, co-owners must be co-borrowers for the home loan. But it is not necessary co-borrowers must be co-owners.

Joint Home Loan Tax Benefit

A husband and wife or parent and child are eligible for a joint home loan. All co-applicants are eligible for simultaneous tax rebates under Section 80 C for principal repaid and under Section 24 for interest repaid. However, these tax deductions are capped at Rs 1 lakh (Rs 100,000) for the principal repaid and Rs 1.5 lakh (Rs 150,000) for the interest repaid. If you and your spouse earn similar incomes, then its best to opt for an equal co-ownership of the property and split the tax benefits of the home loan equally as well. It is good to let the partner with the higher pay make a higher contribution towards the home loan resulting in a better tax benefit collectively. This would help you optimize the benefits from the tax exemption on principal and interest repaid. All the co-owners should have their independent income sources from which the loans are re-paid.

• The tax benefits for loan repayments will be split in the ratio of the share in the home loan.

• Every borrower has to provide a copy of the borrower certificate to claim their respective tax relief.

• If you are neither the owner nor the co-owner of the apartment, you will not be eligible for any tax benefits on the loan repayments.

• Any housing finance company does not accept two cheques for a single EMI. So to make the payment, co-borrowers can use a joint account against which the cheques can be drawn.

• The co-borrowers share the number of EMIs between them such as N number of cheques can be issued by one borrower and the balance by the other.

• Buying a house with joint home loan would be a best decision if both the partners are earning as there is the significant twin benefit of increasing your loan eligibility and maximizing your tax rebate.

• Banks however insist that, co-owners must be co-borrowers for the home loan. But it is not necessary co-borrowers must be co-owners.

If you are a married couple and both of you are working, Joint home loan is an option as there is the significant twin benefit of increasing your loan eligibility and maximizing your tax rebate. Banks insist that joint home loan can only be availed by minimum 2 and maximum 6 applicants and they must be co-borrowers for the home loan. Co-borrowers for the home loan should be either the owner or the co-owner of the apartment to eligible for any tax benefits.

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Tax experts recommends you to enter into an arrangement with co-borrowers (father or spouse) when you started repaying the loan stating the shares of the loan. Share Agreement should be on a stamp paper and notarized (Sample of Share Agreement) You can do it on a stamp paper. Every borrower has to provide a copy of the borrower certificate to claim their respective tax relief and if you are neither the owner nor the co-owner of the apartment, you will not be eligible for any tax benefits on the loan repayments. However, tax deductions are capped at Rs 1 lakh (Rs 100,000) for the principal repaid and Rs 1.5 lakh (Rs 150,000) for the interest repaid. The tax benefits for loan repayments will be split in the ratio of the share in the home loan. A point to be noted here is that under the proposed Direct Tax Code, these tax benefits are proposed to be restricted. Till then, however, one can enjoy the same.