InvestorQ : I am planning to take a home by myself. Are there advantages of taking a loan with your spouse or any other family member?
Kunal Verma made post

I am planning to take a home by myself. Are there advantages of taking a loan with your spouse or any other family member?

Nitin Shah answered.
3 years ago

Yes, there are numerous advantages of taking a loan with another co-applicant. Do note that this co-applicant can be spouse, parents or children.

Even if you are the only applicant who is going to pay towards the EMI (equated monthly installment), it is advised that you add a close relative as a joint owner of the property you are planning to buy.

Taking a joint home loan

When a lender gives you a home loan, the bank/NBFC insists that the joint owner be included as a co-borrower. Lenders usually favour home loan applications where the co-borrower is a close relative, like spouse, parents or children.

Most lenders do not entertain loan applications, where the co-borrower is not one of these close relatives.

Property undergoes a smooth succession

Most of the residential properties that are being purchased these days are apartments or flats in housing societies. From a very practical purpose, it is better to buy a property in joint names as if anything untoward happens to one holder, the society will easily transfer the flat in the name of the remaining joint holders. If a family member is not a joint owner of the apartment, the society can ask for a thousand formalities such as insisting on a probate or demanding a no-objection certificate from other legal heirs of the main owner of the house.

Income tax benefits of joint home loans

The most important aspect of taking a joint home loan is its income tax benefit. Please note, the income tax benefit, be it on the principal repayment of a home loan under Section 80C or for the interest on a home loan under Section 24b, can only be claimed if you are both co-owner and co-borrower.

This mean that the income tax benefits of a home loan cannot be claimed by you, unless you are the owner of the property, even if the loan is being serviced by you, that is even if you are paying the EMIs.

If you have taken a joint home loan for a self-occupied house, then you and your co-owner and co-borrower can claim up to a maximum of Rs. 2 lakh in your respective tax returns. Do note that the total interest paid on the loan is allocated to each owner and borrower in the ratio of their ownership.

Point to remember: The total interest claimed cannot exceed the total interest paid for the loan.

Let’s take the example of Seema and Vilas, who have recently bought a small flat on loan in Mumbai. They have paid Rs. 4,45,000 in interest, and they have a 50-50 share in the property. In their case, Seema can claim Rs. 2, 00,000 in her tax returns and Sanjay can claim Rs. 2, 00,000 in his tax returns.

If in their case only Vilas would’ve been the owner and the borrower, then only one of them would’ve been able take the income tax benefits. Only Vilas would’ve been able to claim the Rs. 2 lakh and the tax benefit for the balance amount would be lost. However, in case the same property is purchased in joint names and the loan is serviced by both the holders, in this case Seema and Vilas, both can claim tax benefit of Rs. 2 lakh each on the interest payment.

Similarly, for repayment of the principal home loan amount under Section 80C, if the property is jointly owned and the home loan is paid by both the co-applicants, then both the applicants will be able to claim the benefit of up to Rs. 1.5 lakh each, presuming there isn’t any other investment or expenditure under the Section 80C head.