Karti and her brother Gaurang are young software professionals who have moved to Hyderabad for work. Karti is keen on buying an apartment to do aways with the hassle of frequent lease renewals. Gaurang has also agreed to contribute to the EMIs, though he is not very sure about his long-term plans. He sees the EMIs as the payment he would be making instead of the rent he is currently paying.
They have decided to take a joint home loan so that they can buy an apartment in a locality of their choice. What are the details that the siblings must keep in mind when it comes to joint ownership?
Before they finalise their decision, the siblings needs to consider all the financial implications of buying a home with a joint loan and make sure that they will both benefit from it.
Home loan providers allow siblings to be co-applicants for joint loans. However, this will require the two of them to be co-owners of the property. It is important to make sure that both Karti and Gaurang are prepared to make a large asset purchase. Once that is decided, they can start shopping for a larger loan to buy a house they like, since both their incomes will be available for repayment.
As co-applicants for the loan, both siblings will be eligible to claim the tax benefits available on repayment of principle and the interest paid, up to the maximum limit available.
They should establish a trail of joint repayment for tax purposes. This can be achieved by both contributing to the down payment as well as EMIs in a way that each person’s contribution can be clearly identified.
Karti should also take a few additional precautions. One is to take a term insurance for an amount that will also cover the loan in case of a sudden death. The other factor for her to consider is that at some point in the future, Gaurang may decide to pull out of the purchase. In which case, she will have to take on the responsibility of paying off the whole loan.
She should, therefore, be ready for that eventuality and only take a loan that she will be able to service on her own, if not on her current income, then at least with her expected larger income in the future. This way, Karti can ensure that a change in circumstances will not catch her unprepared, as she enjoys the benefits of owning a home.
The post Should you buy a house in joint ownership with your sibling? appeared first on Naija Noise Makers.