Home loan

Real estate loan | Should we opt for a solidarity mortgage? Check the pros and cons

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New Delhi: The Covid epidemic has given an opportunity to potential buyers of properties as some developers have reduced prices to attract buyers. Additionally, in the resale market, properties are available at attractive discounts as many landowners who have more than one property are considering selling one to reduce the burden of IME. It is worth mentioning here that many saw their wages drop after the lockdown was announced, while some also lost their jobs.

Many young investors want to take this opportunity to buy a property at bargain prices. However, they don’t have the income to buy a property with a home loan. In this case, they prefer to make their parents or siblings a co-borrower in the mortgage. In some cases, this arrangement led to disputes and complications later. If you are one of them, you should consider the pros and cons of taking out a mortgage together with your sibling.

Merits

Larger loan possible

In the case of joint loans, the banks take into account the income of both applicants to determine their eligibility for the loan. For banks, having a co-borrower on a loan is a positive thing because it reduces the risk of loan repayment. It is therefore advisable to jointly purchase a property with your brother if you are planning to buy a larger house. If you are married, it is always advisable to go for a joint home loan with your spouse.

Higher tax advantage

In the case of a joint home loan, the two applicants enjoy tax advantages separately on the same property. Each borrower is eligible for a deduction of up to Rs 2 lakh on the mortgage interest payment per year under section 24 (b) of the Income Tax Act 1961. In addition to this, both claimants can benefit from a deduction up to Rs 1.5 lakh separately under section 80C. towards the repayment of capital. However, the condition for claiming this benefit is that the construction of the asset has been completed. Loan interest is paid in the same proportion as the share of property between the co-owners.

Transfer of ownership becomes easier

In the event of the sudden death of one of the co-owners of the property, it is easy to transfer the property to the other owner without legal hassle. In the normal course, it would require documents such as the legal heir and the owner’s death certificate to transfer the property to the legal heir. In the event of joint ownership, the surviving brother or sister can have the property transferred to their name by simply making a new registration in their name in the presence of a lawyer.

demerits

The litigation may increase if one of the co-owners stops the EMI payment

During repayment of the loan, if one of the co-owners stops paying his EMI contribution, then the liability of the other owner will increase since he is the co-borrower of the loan. Any EMI default by a homeowner will damage the credit rating of both homeowners and affect their borrowing capacity. Experts advise purchasing home and term insurance to protect borrowers from future liability.

Selling a property can become difficult

In the event of a future conflict between the co-owners, the sale of the property can become difficult. If the two co-owners do not agree on the sale of the property, the investment made by another sibling remains stuck and their future goal with which they aligned the purchase of the property would suffer.

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