Thinking of buying a home? You’d do well to make it a joint venture just like you have for life with your partner. If this sounds cheesy/corny or a line lifted straight from a romantic classic, well, there are benefits to be enjoyed.
Picture a scenario where you get enhanced home loan eligibility, possible stamp duty benefits, lower interest rates, higher tax benefits for the family and higher savings overall. Sounds too good to be true? You can enjoy these benefits if you jointly purchase the home with your spouse according to experts. Many people tend to miss out on all the advantages of joint ownership of property due to lack of awareness in most cases.
Why your spouse can be a life saver while buying a home
Your spouse will not just be the heart and soul of your new home (a mini toast to Sooraj Barjatya classics!) but he/she will play a vital role in smoothening out the buying process for you. There are tons of benefits to be had if you add your spouse as the co-applicant for the home loan and also the co-owner of the property. This naturally works great for emotional reasons as well although this totally depends upon the couple in question.
Some of the more tangible benefits include the following:
- Higher home loan eligibility
- Higher tax benefits and a more manageable home loan
- No succession linked issues in case of demise
- Lower stamp duty and other charges
Both parties benefit from the enhanced tax benefits which equate to higher savings while loan eligibility also goes up which has a major impact on the buying process. Succession procedures are also smooth in comparison to single ownership cases for properties as per experts.
Let your wife lead from the front!
When it comes to buying your home, let your wife lead from the front! Trust us, you’ll not regret it in the future. Registration fees and stamp duty are two of the key charges payable while buying one’s home. In case you have your wife as the first owner of the property, you can save significantly on stamp duty. She’ll also be happy enough to let you buy that new gadget you’ve been eyeing from the money that’s saved!
In several Indian states, experts report that stamp duties for property registration are lower in case of women as compared to men. For the National Capital, women have to pay 4% as stamp duty while men have to pay 6%. 5% is the stamp duty payable in case the property is purchased jointly in the name of both a woman and man. In Haryana, women have to pay stamp duty of 6% and 4% in urban and rural locations respectively while men have to pay 8% and 6% in these zones.
Watch your loan eligibility soar
Continuing with our theme of how love not only adds to your happiness quotient but also brings you tangible savings (could be an accountant’s favourite line!), let’s take a look at home loan eligibility. Now, eligibility is what influences the home loan amount that you eventually get. This is usually 5 times of your annual salary as stated by experts. A co-borrower is always a good idea since it balances out aspects like the primary borrower’s lower CIBIL score, lower income vis-à-vis the desired loan amount and credit history.
A co-borrower is well-liked by financial institutions (they’re all about security anyway!) and the co-applicant for the home loan should be the co-owner of the property as well. This smoothens out the entire process. Now that you have your spouse as the co-applicant, both your incomes will be taken into account and loan eligibility will soar likewise. Suppose you earn Rs. 8 lakh annually and your spouse earns the same amount. You can now get a home loan up to approximately Rs. 80 lakhs (5 times of annual salary). If you would have applied yourself, you would have been eligible for a home loan up to a maximum of Rs. 40 lakhs.
And of course, a female applicant may help you get the rate of interest down should she be the first home buyer. Once again, let your wife lead from the front and reap the benefits (no puns intended!).
Keep your savings momentum high with sizable tax benefits
In case both co-applicants are co-owners of the property, the tax benefits are immense to say the least. Here are the tax benefits that you can expect:
- Deductions up to Rs. 1.5 lakh under Section 80C for repayment of the principal component of the home loan.
- Deductions up to Rs. 1.5 lakh under Section 80C on registration charges and stamp duty payments.
- Deductions up to Rs. 2 lakh under Section 24 for interest repaid annually on the home loan in case of a self-occupied home.
Co-owners can both claim tax deductions separately up to the thresholds mentioned earlier which equates to huge tax savings. They cannot jointly claim in excess of the actual home loan amount that has been paid back annually. In case an equal proportion is put up by both partners during the property purchase, they can enjoy equal benefits on capital gains and taxes as per experts.
Some of the other tax benefits include deductions on rental income. If the property is being let out, both owners can share the income earned and pay lower taxes. Suppose both of you earn Rs. 8 lakh annually as stated above and the property that has been rented out draws in Rs. 3 lakh annually. This means that Rs. 1.5 lakh each will be the extra income added. The individual income will still be lower than Rs. 10 lakh which puts you below the highest 30% tax bracket.
In case your spouse is the co-owner of the property, it makes succession a smoother affair from a legal perspective according to several experts. Joint ownership will enable the spouse to claim rights to the home in case of the unfortunate demise of his/her partner.
There will be no legal hassles involved with regard to mutation of the property in the name of the partner who survives. The procedure is cost-effective and simple at the same time.
Thus, jointly purchasing a home always makes sense with regard to the savings and other benefits that you both get. Also, just like in your personal life, love and trust go a long way towards ensuring the success of joint asset creation as well.