Joint Property Ownership and Joint Home Loans (2024)

When people decide to buy a house, they often wonder whose name should be on the ownership papers. Should it be just one spouse's name, or both names together? Many couples choose to put both names on the property, as it seems fair and simple.

But what if one partner isn't working or making money? Should the property still be in both names, or should you think about including family members like parents or siblings if you live with them? Let’s look at how joint ownership and shared home loans work in India, in a simple way.

Who Can Own Property Jointly?  

In India, anyone can be a joint owner of the property. You can include multiple people, such as family members or friends. Banks usually allow up to six people to be joint owners when applying for a home loan. So, you can have different people like parents, siblings, or even friends as joint owners if needed.

How Are Shares in Joint Property Decided?  

The share of each joint owner in a property is typically outlined in the sale deed, the official document recording the property transfer. If the sale deed doesn’t mention specific shares, all joint owners are assumed to have equal shares. 

For example, if a father, mother, and son buy a property together, but only the father and son contribute money, their actual shares might differ. However, unless specified, all owners are legally considered to have equal shares.

What Happens If One Owner Passes Away?  

The outcome if one joint owner dies depends on the type of joint ownership:

Joint Tenancy: All owners have equal shares. If one owner dies, their share automatically goes to the surviving owner(s). The surviving owners must update the property records to reflect this change.

Tenancy in Common: Each owner may have equal or different shares. If an owner dies, their share is passed to their legal heirs, not to the remaining owners.

In the case of a husband and wife, if the husband dies and the sale deed doesn’t specify shares, the wife will inherit the entire property. This is due to the concept of tenancy by the entirety, which ensures that the surviving spouse inherits the property.

What About a Home Loan and a Deceased Owner?  

If there is a home loan and one of the joint owners dies, the remaining owner is responsible for repaying the entire loan. If there is home loan insurance, the insurance company will settle the loan amount with the bank. Without insurance, the surviving owner must either continue paying the EMI or settle the entire loan amount, which might mean selling the property.

Joint Home Loan: What You Should Know  

A joint home loan lets more than one person apply for a loan together. This can be useful for getting a larger loan amount or better terms. Here’s how it generally works:

Husband and Wife: It’s usually straightforward for married couples to get a joint home loan. Both partners can apply and share the loan benefits.

Parents and Children: If there is only one child, they can be the main applicant. If there are multiple children, the bank might consider only the income of the primary child for the loan.

Parents and Unmarried Daughter:  An unmarried daughter can be the main applicant, with the bank considering the parents' income.

Siblings: Siblings can apply for a joint home loan if they co-own the property. However, cousins, friends, and live-in partners generally need help to apply for a joint home loan.

Income Tax Benefits for Joint Property Ownership  

Owning property together can offer tax benefits. For home loan principal repayment, you can claim deductions up to ?1.5 lakhs under Section 80C and interest paid up to two lakhs under Section 24(b). Both owners can benefit from these deductions if they are co-borrowers. 

Rental income is also split among all owners, reducing each person’s tax liability. Capital gains tax is calculated based on the share percentage listed in the sale deed. If one spouse’s name is added only for tax benefits and does not contribute financially, they cannot claim capital gains.

Disadvantages of Joint Home Loans  

While joint home loans offer benefits, they also come with some disadvantages:

Credit Rating Issues: If one co-applicant has a poor credit rating, it can affect the loan approval and interest rates.

Default Consequences: If there is a default, all co-owners' credit ratings may suffer, making future loans harder to secure.

Selling Property: Co-owners cannot sell their property shares without mutual agreement or specific provisions in the sale deed.

Advantages of Joint Property Ownership  

Joint property ownership can have several advantages:

Reduced Stamp Duty: In some states, female co-owners might pay lower stamp duty charges.

Higher Loan Eligibility: A joint home loan can increase the total loan eligibility, allowing for a larger purchase.

Better Interest Rates: Banks may offer better interest rates if a female is a co-owner.

Joint Declaration Form for Home Loan  

You’ll often need a joint declaration form when applying for a joint home loan. This form lists all co-borrowers and their shares in the property. It helps the bank assess the loan application and determine eligibility and terms.

Using a Joint Home Loan Calculator  

A joint home loan calculator can help you determine how much loan you can get based on the combined incomes and other factors. It estimates monthly EMIs and the total loan amount, helping you make a more informed decision about buying property.

In Summary  

Joint property ownership and joint home loans have many benefits but may only be right for some. Before deciding, think about:

        •  Who will be co-owners or co-borrowers?
        •  How will the property be divided if an owner dies?
        •  How will taxation be handled?
        •  How much home loan is needed, and is a joint loan necessary?
        •  What financial provisions are required for future risks?

Understanding these aspects will help you make a smart choice about joint property ownership and home loans. If you found this information useful, share it with anyone considering buying property. For more insights into Indian real estate, consider following us for more informative articles.