Buying a house is one of the biggest investments one could make in their lifetime. One of the most attractive features of a home loan is that it helps in reducing income tax liability of the person availing the loan. A home loan makes borrowers eligible for tax rebates under Section 80C and Section 24 of the income tax regulation.
However, in many instances, it becomes very difficult for a single individual to afford and service the home loan, which results in two or more individuals jointly taking the loan. In such cases, the tax benefits can be claimed by both the co-borrowers individually under Section 80C and Section 24. The only mandate for claiming the income tax rebate is that the co-applicants of the home loan should also jointly own the underlying residential property.
Eligibility for joint home loan:
A joint housing loan can only be availed by a minimum of two and maximum of six applicants. A borrower cannot take a joint home loan with just any other person. The lender defines the relationship between co-borrowers eligible to take such a loan. A joint home loan is given to married couples or close blood relatives like parent and child.
Some banks though permit brothers to take a joint loan provided they both will be co-owner of the property. Usually, banks insist that all co-owners of the home must be co-borrowers in a joint home loan. Friends or unmarried couples are not allowed to take a joint home loan.
The ownership structure of the property is a very important factor in case of joint loans. Ownership of the house makes one eligible for the tax benefits. The tax benefits for co-borrowers are applicable in ratio of ownership in the property. So, the ownership of property should be carefully decided keeping in mind the re-payment capacity of both the borrowers.
The share of each holder should be clearly mentioned so that there is absolute clarity on the percentage ownership of each co-owner.
In case, a husband and wife jointly buying a property might want ownership in the proportion of 70:30 or 50:50, depending upon their financial condition, the repayment of the loan (EMIs) as well as other payments on the property has to be made in this specific proportion only.