Must know facts before you take a joint loan

As the numbers of income households have gone up during the past few years, more couples are choosing joint home loans to make their dream of taking a house come true. The advantage of individual tax gaps and an augmented home loan qualification mainly influences this decision.

Although, before applying for a home loan jointly, Ratan Chaudhary, Head of Home Loans, paisabazaar.com shares the following points, which the Financial Express has reported as the following:

1. Qualifying criteria for joint borrower:

The joint borrower must be the owner/ joint-owner of the particular property, even when he/ she doesn’t possess any way to earn. Always, remember while assessing your joint home loan form, the primary as well as secondary applicant’s credit score, income, age, debt to income ratio etc. are considered and the loan is guaranteed only after borrowers are considered satisfactory on all conditions.

a. Pre-requirements before availing tax deductions on joint home loan

Majority of the home purchasers willing to avail a joint home loan don’t know that while availing tax deductions under Section 80C and 24b, in order to get separate tax benefits on the joint home loan, the co-borrower statutorily has to be the co-owner of the property. Being only a mere co-borrower but not co-owner of the specified property would strip you of the linked tax benefits, even when you have been paying the EMI installments, and interests.

b. Property construction must be completed

Availing home loans for buying under construction property is a daily habit of home purchasers. However, the title and the ownership of the property will be transferred in the near future; the home purchasers must start their home loan installment and interest payments immediately. Tax gains of such payments would also qualify for availing beginning from the financial year in which the property construction was completed, but not in the working in progress period.

Nonetheless, interest and installation payments during before construction period can be availed as tax deduction for five years (i.e., in five equal installments), beginning from the year after availing possession. But don’t forget that the maximum deduction that can be claimed for interest payment is restricted at an entire limit of Rs 2 lakh per financial year.

3. Extra benefits with woman co-applicant:

a. Low stamp duty charges

Many home buyers buying property jointly are not aware of this lesser-known deduction available under Section 80C, besides the extra concession generally provided to women co-applicants. Few states generally provide a concession with 1-2 per cent per cent on stamp duty charges during the registration of the property in the woman’s name, either as single owner or as co-owner. The stamp duty, registration expense and other costs directly related to transfer of property are qualified to be claimed as tax deduction under Section 80C, with a maximum capital of Rs 1.5 lakh in a financial year.

However, note that this deduction must be claimed during the same year in which you, along with your wife had incurred those expenses.

b. Concessional interest rates

Whereas taking a joint home loan with a lady co-borrower like your own wife, mother or sister, can fetch alluring concessional interest rates of ordinarily up to 5 basis points (i.e 0.05 per cent) lower than standard rates from numerous moneylenders.

(With agency inputs)