Must Know Facts If You Jointly Own A Property With Spouse
When his bank told Shashank Shekhar, 33, he could increase his loan eligibility by making his home-maker wife Shalini Shekhar a co-applicant in his loan plea, the mechanical engineer readily agreed. What could be the harm anyway, he thought. While he was thinking of ways to quickly finance his property purchase, Shekhar did not have much time to think about what could be the other benefits or drawbacks of such a move. While it is hard to foretell how such a deal will play out in future, there are certain things you should keep in mind if you are signing up for a deal like that:
- First and foremost, one does not become a co-owner of the property by becoming a co-borrower in the home loan application. However, wives do not have to worry about that as far as ownership is concerned. Under the provisions of the Marriage Laws (Amendment) Bill, 2010, a wife by default becomes a co-owner of a property purchased by her husband after marriage.
- The property papers should clearly define each co-owner's share in the property. This will not only help avoid future conflict on ownership but also fix tax liabilities accordingly. In a scenario where a husband wants to give a larger share of the property to his wife, he must not forget to mention the same in the property documents.
- Despite being a co-owner, a wife cannot claim tax benefits if she is not a co-borrower, too. This is the reason why most borrowers are advised to make their wives a co-applicant in their home loan application.
- In a joint property, co-owners must declare their income and claim deductions in their respective tax returns. In the above example, however, Shekhar would be claiming all the deductions. This might not sit well with tax authorities.
- The responsibility of re-paying the loan would lie with the non-earning member in case the principal applicant is unable to do so. This is the reason a non-earning member should ideally not be made a co-borrower. For instance, after the death of a husband, the home-maker wife will be forced to sell off the property and repay the bank loan. This defeats the whole purpose of investing into a property.
- In a joint home loan, the re-payment history would reflect on both co-borrowers. In case the principal borrower defaults on payments, the credit worthiness of the other co-borrower would also be impacted. This would mar the latter's chances of availing another loan in future.
There are several benefits of jointly owning a property.
- In certain cases, a single borrower's income restricts his chances of investing in a property of his choice. A co-applicant can save the day in a scenario like this.
- For working spouses, co-borrowing of home loan can be an effective method to save on taxes. Under the I-T Act, co-borrowers individually enjoy deductions on Rs 1.5 lakh per annum on the principal component and Rs 2 lakh per annum on interest component on a home loan.
- Most states charge a lower stamp duty if a property is registered in the name of the woman of the house. Across states, women have to pay about two per cent less as stamp duty charges for property registration.
- In case of single ownership of property, distribution of assets might be complicated after the demise of the owner. In case of joint ownership, the surviving member preside over the succession strategy.