You’re certainly not reading this because you love real estate articles. Instead, you’re going to buy a property and want to know more about the option of what you recently heard from your friend or colleague. Right? Yes, buying a property can be quite stressful and it is quite easy to get confused about many things, such as whether you should opt for buying a property in your own name or buying properties jointly.Here are a few facts everyone should know about buying a property in joint names.
While pleasing your wife or husband is one great benefit of adding them as a co-owner, let’s face it; you’re not just satisfied with that. ‘Are there any special benefits,’ you may ask. Yes, there are many other advantages of buying a property in joint names. So, read through these facts and we’ll let you decide for yourself whether you need to go for a joint property ownership or not:
1) There’s a difference between a ‘co-owner’ and ‘co-borrower’!
More often than not, the term ‘co-owner’ and ‘co-borrower’ are used interchangeably. However, there is a thin line of difference between the terms, despite being closely related. In simple terms, a ‘co-owner’ is a person who has right to the property, while a ‘co-borrower’ is responsible for the repayment of the debt.
While it is important that a ‘co-owner’ be a ‘co-borrower’ also when it comes to taking a loan for joint property purchase, the opposite may not be necessary. A ‘co-owner’ who is not a ‘co-borrower’ is not eligible for any tax rebate. The same applies to a ‘co-borrower’ who is not a ‘co-owner’. Only a ‘co-owner’ who is also a ‘co-borrower’ is entitled to certain tax benefits.
So, the first thing you need to do is, understand these two terms better and preferably, keep your wife (or co-owner) as a co-borrower when you go for a joint property ownership. This way, you can get the most important benefit out of the joint property purchase, i.e., tax deductions. Buying a property in joint names is a logical and conclusive step, once you are clear with these terms.
2) Is there any legal specification on who can be a joint owner?
Talking in legal terms, a joint property ownership is possible between anyone — close relatives (including your parents, siblings, or spouse), distant relatives, or even your business partners or friends. This is because, it is not mandatory for a co-owner to be a co-borrower, and need not be responsible for the financing. If you’re financing alone, then this makes perfect sense, as it is not necessary for the co-owner to contribute.
However, when it comes to getting a bank loan, most banks are ready to lend you a loan for a joint property ownership, only if the co-owner of your property is a co-borrower. In this scenario, the co-owner (& co-borrower) needs to be a close relative, such as your spouse, parents, and children. This is because, banks do not prefer lending home loans when a co-owner is someone else, like your business partner, a friend, or even your brother/sister (in certain cases).
This means, if you want to get a home loan on a joint property purchase, you’ll need to have a close relative as co-owner. If you decide that the co-owner is not a close relative, there’s a very little chance of getting a home loan — so, you may have to consider other financing options.
3) You’ll be eligible for higher home loan amount!
If you require a home loan amount higher than what you’re eligible for, a joint property ownership could be your best resort! By adding the co-owner as your co-borrower, you can get a higher loan eligibility, as banks consider the aggregate of the incomes of all the applicants. You can obtain a joint home loan along with your close relatives. As mentioned above, a close relative can be your spouse, parents, or children.
4) The tax benefits from joint property ownership can blow your mind!
If you’re availing a joint home loan for buying a house property, you become equally responsible for the repayment. This means, you and the co-applicant(s) can enjoy certain tax benefits. That said, these benefits only apply if the co-borrower is a joint owner of the property.
According to Section 80C, you will be able to claim up to Rs. 1.5 lakhs per annum as tax benefits on your home loan amount. Additionally, you are eligible for Rs. 2 lakhs per annum of tax returns on your interest payment amount. If you’re a sole owner or a sole home loan borrower, only you’ll be able to enjoy this benefit. Now, take the case where you’re getting a joint home loan keeping your spouse as co-owner and co-borrower. In this instance, both of you can individually claim the tax benefit of 1.5 lakhs on the home loan amount and 2 lakhs on the interest repayment amount. This is one of the best features of a joint property purchase in monetary terms.
5) You can avoid all succession disputes with joint property ownership
Succession of property is one thing that disturbs the peace of almost all families. Apart from the huge disputes that occur inside the family, the other hassles that follow the death of the sole owner of the property include extensive paperwork, long & time-consuming legal formalities, and the mental torture until someone takes the possession.
Through a joint home loan, and buying a property in joint names, all of these challenges can be overcome quite easily, as the joint owner will become the successor automatically. You can also prevent all those groundless problems and discussions that follow after the demise of one of the joint owners. That’s why joint property ownership, keeping your spouse as a joint owner, is always recommended if you’re buying a house property after your marriage.
6) You can get an attractive discount on stamp duty on joint property purchase
The stamp duty that you pay the state for the registration of your property is a significant percentage. Although it varies from state to state, the joint property buyers get a relaxation of 1% when compared to the stamp duty paid by men, who solely own the property. In New Delhi, the stamp duty paid by men is 6% of the property’s value, while it is only 5% if you choose to buy properties jointly (regardless of the joint owners’ sex).
That said, the stamp duty paid by women is even lesser — 4% of the property’s value. So, if you’re looking to buy a property, where a woman is the sole owner, you can get even cheaper deals on the stamp duty. However, joint property ownership is still an eye candy compared to the stamp duty you’ll have to pay for property solely owned by a man.
Apart from taking an informed decision while buying a house property, it is always important to leverage all the available means to get some benefit out of it. If that’s what you’re looking for, a joint property purchase could be a big step in the right direction.
Buying a property in joint names helps to make property decision making and buying, simpler and easier. Another important step is choosing the right property that matches your property buying concepts and HousingMan.com could be your ideal place to pick your preferred property.