Buying a house is a life-time decision and a lot of effort goes into finding a suitable house that fulfills the needs of all family members. Since it also involves a large amount, a lot of times people’s life savings, it’s better to be prudent about every small detail around the buying decision. Money is the biggest constraint when you are searching for houses to buy.
Buying a home is a family decision generally taken only when both the spouses are ready for the same. Adding your spouse as the co-owner of the home not only lets your spouse enjoy the feeling of ownership but also fetch you financial gains too. Let us read through a few tips to understand the implications of adding your spouse as a co-owner when buying a home.
Stamp duty charges are one of the significant additional expenses which a home buyer has to bear while buying a home. With a female as a co-owner of a property, one can get relaxation in stamp duty charges. The stamp duty rates are different in different states and the state governments offer rate relaxations to encourage more and more ladies to own a property. The stamp duty charge of a property depends on the market value of the property and a home buyer has to pay a certain percentage of the property value.
Following are rates from a few states:
State For Men For Women
Jharkhand 7% Re1
Delhi 6% 4%
U.P. 7% Rebate of Rs 10000 on overall charges
Rajasthan 5% 4%
Punjab 6% 4%
You may significantly save on the cost of buying a house if you add your spouse as a co-owner when home-buying.
Most property purchases are financed through home loans. When offering a loan, lending institutions first determine eligibility, which primarily depends on the income of the borrower. Generally, loan eligibility is around five times the annual salary of the borrower. However, if the borrower’s income is insufficient, has a low credit score or a low repayment record, a co-borrower’s addition will serve as a blessing for the loan applicant and the lender is assured of timely repayment at the same time. Financial lenders require all co-owners of a property to be co-applicants of the home loan.
In the case of joint applicants, the incomes of all the borrowers are taken into consideration to determine the loan eligibility and can enhance the loan amount. In this way, your loan eligibility will be increased and you can avail of a higher loan as well as a better home too. For instance, if your yearly income is about ₹ 10 lakh, you may get a loan of up to ₹ 50 lakh. If your spouse also earns ₹ 10 lakh a year, both of you can jointly borrow up to ₹ 1 crore.
The Indian Government provides a tax exemption on home buying, to encourage more and more home buying. As per tax laws, a home loan borrower can claim a tax deduction of Rs.1.50 lakh for principal repayment under Sec 80C and Rs. 2 lakhs for interest payment under Sec 24 and if the property for which the loan is taken has more than one owner, both of them can claim tax benefit.
It is always beneficial when both partners contribute an equal proportion while buying a property. This will help them in getting equal taxation and capital gains benefits.
There are other tax benefits too in case you plan to rent out the property. The rental income may be shared by both the owners and help fetch lower taxable incomes. Suppose both the owners earn 8 lakh per annum and their home is rented out at ₹ 4 lakh per annum. So this rental income of 2 lakh will be added to each of their incomes. Their total individual income would be 10 lakh each, which will fall below the 30% tax slab. If the property was owned by only one of them, the total income of that individual would have become ₹ 12 lakh, pushing the person in the 30% tax bracket.
Almost all the home loan providers in the country give an interest rate relaxation on home loans if a female co-owner is added and the minimum relaxation one can get is 0.5%. Although the number looks small when your loan amount is big and your tenure is long, the relaxation of 0.5% makes you save a handsome amount.
A jointly owned property is a hassle-free decision when it comes to a succession of the property. At the legal level, joint ownership ensures that the spouse has no problems when it comes to claiming his or her rights of the property in the case of the demise of the other spouse.
It has been witnessed many a time that after the death of the owner of a property, transferring the property to their legal heir or the surviving spouse takes a cumbersome process. It needs a lot of paperwork along with a quite good amount of money. But if the ownership of the property is shared by the spouses, in the case of the demise of any of them, the surviving one will have the entire ownership on the property.
Making your spouse the co-owner of the property provides them the feeling of ownership of the property. Though there are many benefits of sharing the ownership of the home with your spouse, there are some drawbacks too. Human life is unpredictable and if the relationship sours, the joint property will be the scrape. In the worst case, if the partners get a part, it would become a lengthy as well as an expensive affair to settle the matter of co-owned homes.
If you intend to buy property this handy guide will serve as a ready reckoner as to why you must consider adding your spouse as a co-owner in the purchase.