COVID outbreak has endowed great opportunity to prospective property seekers as few developers have slashed their prices to entice buyers. Also, in resale markets, many properties are available at captivating discounts as many of the property owners with more than a single property are looking to sell one to lower their EMI burden. Worth stating here is that many have faced pay cuts after the COVID lockdown, while few even lost their jobs.
Many young investors are looking to avail this opportunity to purchase a property at the rock bottom low prices. However, they do not have the necessary income to purchase the property through a home loan. In these cases, they prefer making their siblings or parents joint seekers of home loans. Although, at times, such an arrangement may lead to disputes and complications, still many prefer taking up this route to purchase a property.
If you are one of them, you must consider the listed:
Major tax benefit
In the case of a joint home loan, both applicants avail of tax benefits separately on the same property. Each of the home loan borrowers gets up to Rs 2 lakh tax deduction on the Home Loan Interest Rates repayment each year as per Section 24 (b) of the IT Act.
Additionally, both the loan applicants can take up to Rs 1.50 lakh tax deduction separately as per Section 80 C towards their principal repayments. However, the major condition to claiming the benefit is that the property construction must be done. The loan interest is repaid in the same ratio as the ownership share among siblings.
Swift transfer
In the case of the sudden death of one of the property’s co-owners, it is simple to transfer the land property to another owner with zero legal hassles. In a normal course, you will need documents such as your legal heir and the death certificate of your property owner for transferring your property to your legal heir.
In the case of joint ownership, your surviving sibling can get the property transferred in their name by easily getting a fresh registration done.
Huge amount
In the case of joint loans, banks factor in the income of both applicants to understand their home loan eligibility. For the banks, having a co-borrower in a loan is a positive thing because it lowers the loan repayment risk. Thus, it is recommended to jointly purchase a property with your sibling just if you are looking to purchase a big home.
Sale issues
In the case of future conflict between siblings, selling your property might become tough. If both of you disagree on selling the owned property, then the investment by each of you will stick for long.
EMI repayments stop = disputes
During the loan repayment phase, if one of the siblings stops contributing towards the EMI, then the debt liability of the other sibling will rise as he is the loan co-borrower. Any default or failure in EMI repayment by the sibling will impact the score of both siblings. Thus, it is recommended to take up term insurance and property insurance to secure yourself against any future liability.
Also, ensure to take the help of the SBI Home Loan EMI Calculator or HDFC home loan EMI calculator to compute your EMI and repayment tenure as per your repayment capacity. Knowing your EMI from before will save you from EMI default as you would plan your expense accordingly.
Check out the story that takes you through crucial parameters to note before availing the home loan with your sibling:
Roshan has realized that purchasing a home is not simple in a metro like Bombay, where he has been working with a highly renowned design house for 5 years. He hails from a very small town with lots of dreams wherein one such dream is of owning a home in the city he works, and the home must not be far from his workplace.
Unfortunately, he has realized that it is impossible for him to pay for a 2 BHK house of his choice. Either he will have to part with a massive savings amount or will require reselling an existing land to afford the house in Bombay. He has a very decent credit score of 730. His banker companion suggests he avail of a joint home loan with his older brother, who is a successful lawyer in the same city. Roshan is extremely confused with the suggested idea. However, as he is heavily inclined towards his dream of owning a home in Bombay, he decides to talk with his brother.
As the name suggests, a joint home loan is a credit option that you can avail yourself of with another individual, usually your spouse, sibling, or parents. Roshan can also avail of the joint home loan if he is not capable of repaying the complete loan amount on his own. In simpler words, he is not eligible for a bigger loan because he needs to be able to afford a costly property. He requires to go for the joint home loan route. By dividing his loan burden with his family member via a joint home loan, the lender will think that the debt would be repaid easily. His chances of availing of the home loan at a captivating rate of interest are way higher in a joint home loan than the regular one. His brother, as the co-applicant, can make it simpler for him to avail of a bigger loan amount just if his score is good and their joint income is huge enough to cover the loan EMIs.
Moreover, according to the tax regulation, a joint home loan will permit both the co-borrowers, i.e., Roshan and his brother, to claim tax deduction benefits as per Section 80 C. They each can avail of tax deduction of up to Rs 2 lakh on interest repayment and Rs 1.50 lakh on a principal component. This means that both Roshan and his brother can enjoy a lower individual taxable income.
