Joint home loans offer individuals the ability to purchase properties while also saving on interest and tax savings. However, individuals must understand both its advantages and disadvantages before opting for this form of financing.
One advantage of joint loans is the tax benefits available based on ownership ratio; this will determine their loan deduction fraction and thus benefit them the most financially.
Tax Benefits
Homeownership can be one of the most significant investments of a person’s lifetime, not only offering them shelter but also helping them save on taxes, as home loans are tax deductible under the Income Tax Act of 1961. However, certain conditions must be fulfilled in order to reap these tax advantages, such as ownership of property and eligibility to claim tax deductions, among others – though eligibility for home loans can easily be determined using a joint declaration form.
Joint home loans can be an ideal way to save on interest while purchasing a more extensive or better house since their eligibility depends on pooling the incomes of two or more applicants and sharing responsibility equally for paying equated monthly installments (EMIs). Furthermore, some banks and financial institutions offer discounted interest rates when women co-apply as co-applicants on joint loans.
Joint loans not only reduce the EMI burden, but they can also offer tax advantages. Under Section 80C of the Income Tax Act, tax benefits of up to Rs 1.5 lakh may be claimed annually against principal portion loan EMIs paid; both co-borrowers can make use of this benefit provided their property has been completed within five years from when their loan began.
Joint home loans may also be suitable for senior citizens as it allows them to benefit from tax exemptions over an extended term, as most seniors typically have a steady income and are likely to make payments on time. It should be noted, however, that senior citizens can only access joint home loans with their spouse or close relative due to lender requirements of declaring income during application for such a loan.
Tax Deduction Fraction
When multiple co-owners take out a home loan at once, tax benefits may be divided among them according to the ownership percentage of the property. A joint declaration form should clearly outline this ownership percentage so co-owners can easily claim their share of interest and principal repayment benefits.
As well as interest payments, taxpayers may also deduct expenses associated with maintaining their property, such as electricity, water, and fire insurance premiums. They can also claim significant and unreimbursed repair costs that have occurred that were significant and unreimbursed by tenants; such expenses should be documented on rows 32-34 of their income tax return.
Home loans qualify for tax deductions up to Rs 2,00,000. However, these deductions only apply if the property is self-occupied; renting it out means no such benefit can be claimed. Tax savings apply over five years following the purchase or construction of the property.
To take advantage of tax benefits, a loan must be used towards purchasing or building a house; both owners must sign on as co-applicants on the loan documents. The ownership ratio should also be clearly specified so they can claim their share of tax relief.
Note that joint home loans used to buy or build commercial properties do not qualify for Section 80C deductions and that any income generated from rent must be taxed as income by the taxpayer.
Notably, joint home loans can only be claimed on properties that are either self-occupied or let out. Prior to Budget 2018, only one property could claim this benefit, but this limit has since been increased to two properties.
Eligibility
Home loans are significant financial commitments requiring extensive paperwork. To speed up this process and ease the repayment burden, joint home loan applications with your spouse or partner are highly recommended – you can pool income to increase loan eligibility while sharing the repayment burden and benefiting from lower stamp duty and interest rates. Under this scheme, a maximum loan amount of Rs 100 cr can be borrowed, while co-borrowers should only include close family members such as spouses, parents, siblings, or children.
Eligibility for a home loan typically depends on your monthly income, credit score, and the value of the property you wish to buy. But you should also factor in any additional expenses like down payments and loan closing costs when considering your eligibility. Be mindful of any tax deductions or benefits available – for instance, you could claim tax benefits on both interest and principal payments with co-owner loans!
Lenders require proof of identity, address, income, and co-applicants’ KYC documents in order to assess loan eligibility. In order to speed up approval processes, it’s recommended to submit these documents as soon as possible – otherwise, lenders might consider your co-applicants’ combined income when making decisions about loan eligibility – it’s also worth remembering that joint ownership cannot be approved unless both co-applicants own equal shares in a property together.
EPFO employs a joint declaration form for members to correct errors in their provident fund accounts, as mistakes could prevent you from claiming, transferring, or withdrawing it. You can find this form online on their Member e-Sewa portal; when filling it out, you should provide information such as your name, date of birth, and Aadhaar number, as well as self-attested ID proof documents if desired.
Documentation
Co-applicants of home loans must present accurate income documents in order to demonstrate their ability to repay the loan. Lenders use applicants’ incomes as the basis for loan eligibility evaluation, so co-applicants could pool their incomes to qualify for higher loan amounts and buy more significant properties – though one doesn’t need to co-own.
In order to prevent future conflicts, all parties involved in purchasing property should sign a memorandum of understanding document that outlines their share in the property as well as how EMI payments will be split among themselves. This will prevent disputes from arising later.
To apply for a joint home loan, each party must submit notarized copies of the following documentation:
The first section of the form inquires into the purpose and property for which a loan will be taken out, while the second asks about financial details such as employment records and past credit histories. Keep in mind that specific lenders impose restrictions on who can get joint home loans together with each other.
If you have recently changed jobs or relocated, submitting a no-objection certificate from your previous employer can help ensure a better interest rate and shorter repayment period.
If you need to amend your PF details, two methods exist for doing so. Either using the Member e-sewa portal or submitting a joint declaration form at your regional EPFO office will do. PF joint declaration forms allow employees to correct any incorrect details in their accounts, such as name, date of birth, or mobile number – these forms can be downloaded from the EPFO website and submitted at regional EPFO offices.
