Joint Home Loans and Tax Benefits

If you have a dream of purchasing a home, but are worried about the Home Loan Amount, bank is going to sanction against your current income, relax… take a deep breathe and calm down. Usually, Banks do not allow a person to borrow to an extent where their monthly EMI(Equated Monthly Installments) payment exceeds more than 40-50% of their monthly income. If you are in a similar situation and your current income is not high enough to ensure the Required Home Loan Amount, there is a smart option that you can exercise. You can (and in fact should) go for a Joint Home Loan with your parents or spouse as co-borrower(s) of the property. With co-borrowers/co-applicants around, for Loan-Amount-Calculations,  Bank will take into account the income of all the applicants involved. Some banks even allow siblings as co-borrowers, so you may have to check with your bank, if you can have your brother as co-borrower.

But before you jump to a decision of taking Join Home Loan, it is certainly advisable to be aware of the Pros and Cons of taking a Joint Home Loan.

Pros:

  • If you need a higher loan amount but your salary is not enough to get required loan amount, Joint Home Loans is the way for you.
  • All co-applicants are eligible for getting tax rebates under Section 80 C for principal repayment(Subjected to a Maximum Amount of Rs 1 Lakh) and under Section 24 for Interest Repayment(Subjected to a Maximum Amount of Rs 1.5 Lakhs). So if a couple is taking a Joint Home Loan, in theory  they could collectively claim Tax Exemptions under Section 80 C for Principal Payment of Rs 2 Lakhs and under Section 24 for Interest Payment of Rs 3 lakhs. Though the Actual Tax Exemption depends solely on the Monthly EMI being paid.
  • Both the owners would have to show the Rental Income in Proportion of their ownership. So if your brother has a 40% stake in the house and you have 60%, for tax purposes, 40% of rental income from the house will be added to your brothers’ annual income for that financial year, while you will be responsible for rest 60% amount.

Cons:

  • In case of any dispute arising between the borrowers/owners, it could create problems, so you want to play safe, especially with your wife 😉 you should not go for it.

Apart from these, there are some important points which you need to keep in mind, before taking Joint Home Loans:

  • You should be a co-owner to enjoy tax benefits of a Joint Home Loan
  • A maximum of 6 co-applicants are allowed to be part of a Joint Home Loan.
  • You should be a co-applicant of the home loan to get tax benefits out of it.
  • Tax Benefit to individual borrowers  is available in proportion of the EMI paid by them. Say for example, you are paying 70% of the EMI and your wife is paying rest 30% , you will be able to claim tax-exemption only on your 70% payment. Similarly, your wife can also enjoy tax-benefits on her 30% payment.

So enjoy your dream house with your spouse as a Joint-Owner as well as Joint-Borrower 🙂

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3 responses to “Joint Home Loans and Tax Benefits

  1. Yes definately should not go wid wife otherwise what Rajesh had done wid her wife, she will do wid us.

  2. Rajesh……..Hot breaking news last month, pieces of dead body lying in refrigrator.But cool!!! we will not face the problem….

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