Taking a home loan to fund your house purchase? Don’t buy the property alone. Getting a co-buyer for your house property or apartment makes a great decision, thanks to tax advantages and also savings on stamp duty at the time of property title registration. You can have your spouse as your co-borrower or, if you are single, you can have your father or mother as a joint-owner and co-borrower for your home loan.
Let us explore how you benefit from a co-borrower for your home loan to fund your home purchase.
Higher Home Loan Eligibility
Home loan lenders disburse a property loan based on your repayment capacity and your age for repayment tenure. When there are more than one property owners taking a home loan for a house purchase, the total income of all borrowers taken together is considered for the purpose of home loan eligibility. This increases your total home loan eligibility.
Generally speaking, 50% of the total monthly income is considered as the maximum EMI (equated monthly installment) payment capacity for loan amount eligibility. If you have any existing loan, the monthly payment for that loan is deducted from this amount.
Joint Tax Benefits
When you have two or more borrowers for a home loan, all the co-borrowers get to benefit from tax incentives allowed for home loan and property purchase. Under Section 80C of the Income-tax Act, each co-owner gets an exemption up to Rs 1.5 lakh on the repayment of the principal amount of the home loan.
Under Section 24 of the Income-tax Act, an additional exemption of up to Rs 2 lakh on the interest paid on the loan is allowed.
An additional tax benefit of Rs 50,000 is allowed for home loan interest payment under Section 80EE for financial year 2016-17. However, this additional deduction is allowed only for loans up to Rs 35 lakh taken between 1 April 2016 to 31 March 2017 for purchase of property up to Rs 50 lakh, and the taxpayer should not own any property on the date of loan disbursement from a financial institution.
These tax benefits are calculated in proportion to the amount you borrowed/your repayment contribution. Suppose you borrowed 50% of the loan and your co-borrower the remaining 50%. You can claim tax benefits on 50% of the loan repayment and the interest paid. The co-borrower claims tax incentives for his/her component.
Having two or more borrowers for a home loan makes it possible to multiply your tax benefits up to the number of co-borrowers. If you have three borrowers for a home loan, each one can claim a deduction up to Rs 1.5 lakh for principal amount paid, which means your total deduction gets multiplied by three times.