Benefits & Precautions for taking a joint home loan

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.