Planning out finances for your new home can require some good pondering which often leads to one solution – Home Loan. A home loan is usually the biggest financial obligation on an individual, and the soaring prices of real estate don’t make it any easier. In some cases, it might happen that even a loan won’t be able to cover up your expenses or your income might not be enough to be eligible for availing one. In such cases, a joint loan starts to make much sense.
As evident by the name, it’s a home loan taken under the name of multiple people including your folks, spouse, children and some selected kin given they are eligible for it.
Being a Co-borrower
Although you can pick anybody to be the co-borrower, it is always advisable to choose close individuals like your spouse, parents or children. The best part about being a joint owner is that he/she doesn’t need to contribute towards the purchase of the property, i.e. they need not be the co-proprietor too.
Tenures for a joint loan often tends to be on the higher side compared to a regular one, especially if the co-owner is your spouse. The maximum tenure is 25 years which gets sliced to 10-15 years if your co-owner happens to be your parent, child or siblings depending on multiple factors such as their age, income etc. Specifically, in the case of parents, the lender would link the repayment tenure with their age of retirement.
Succession of property
Holding a joint loan encourages a smooth progression of property to different holders in the event of a death of the other holder. This will be done without being demanded of probate or being the legal heir of the holder. This is another reason why you might need to think about taking a joint loan for purchasing a house.
Repaying the loan
Though the loan is claimed by numerous holders, by default, just one of them should pay the EMI. You can choose to pay instalments from multiple accounts by creating a joint account for the same and asking the co-borrowers to contribute their share there. Afterwards, you can choose to pay EMI from that account.
Borrow more with a joint loan
The major reason why many people choose a joint loan is that it enables them to borrow more. After all, buying a house is more often than not, a one-time thing and many don’t want to make a compromise. With a joint loan, you can benefit high advances regardless of whether you have different liabilities.
The Income-tax Act allows the co-borrowers to assert both principal repayments as well as interest repayment as deductions from their income. As an individual, one can get up to Rs 1.5 lakh as a deduction under Section 80C and Rs 2 lakh tax deduction for interest payment under Section 24.
In case you take a home loan in your name alone, then what you can claim maximum will be Rs 1.5 lakh on principal and Rs 2 lakh on interest. On the other hand, assume you take a joint home loan with your life partner and your repayment for the year is Rs 6 lakh, with Rs 4 lakh interest repayment and Rs 2 lakh principal repayment. Then, if you and your partner have an equal share in the property, both of you can claim up to Rs 2 lakh each under Section 24 (towards interest paid) and Rs 1 lakh each under Section 80C. The maximum you can claim under Section 80C is Rs 1.5 lakh.