If you are planning to take a home loan for your dream home Joint Home Loan could be the best Idea for you if your spouse is working. The Joint Home loan comes with a bundle of Benefits.
A Bigger House with a big loan eligibility: A joint home loan also means eligibility for a higher loan amount. The lender takes into account both their incomes to determine the eligibility of loan, and this can enable you to buy the bigger house with bigger loan amount.
Double Tax Benefits: One can get tax benefits through a home loan under two Sections of the Income Tax Act, 1961. Under Section 24 — Deduction on interest on a home loan for a self-occupied property up to Rs 2 lakh. Under Section 80C — Deduction on repayment of principal amount on a home loan up to Rs 1.5 lakh.
For an example, if you are paying home Loan EMI of Rs. 10 Lakhs (Rs.5 Lakh as Principle & Rs.5 Lakh as Interest) you will get maximum deduction of Rs. 1.5 lakh under sec 80C from Principal paid & Rs. 2 lakh u/s24 from the Interest paid. On the other hand if you have taken the loan jointly in that case both of you are eligible to claim the same amount of deduction u/s 80C for the principal paid 7 u/s 24 for the Interest amount paid. Therefore your total deduction would be Rs. 7lakh for a single home loan. This brings down the family’s total tax liability. However, co-ownership is mandatory to avail of tax benefits.
Co ownership: Being a co-borrower for a house does not automatically make one a co-owner. Repayment of a joint home loan is the collective responsibility of both the borrower and co-borrower and each of them is liable for the loan.
However, there may be problems in case of divorce. If the spouse who is moving out of the house refuses to pay the loan, or if one of them files for insolvency, or if one passes away, it becomes the co-borrower’s responsibility to repay the entire loan. In the event of a default, there could be legal action against all joint borrowers.
The repayment record of a joint home loan reflects in the credit score of all co-borrowers. Hence, a default in payment by the partners can impact the eligibility for a loan in the future.