Add your spouse as a co-owner when buying a house

While buying a home and applying for a home loan it is always beneficial to add one's spouse as a co-owner and co-applicant. The fact that it helps in getting a higher loan amount is well known. But there are some other benefits that are not well known. Let use see what these are.

Eligibility and interest rate

When applying for a home loan, the lender calculates the loan eligibility amount based on the applicants' income. If both partners are salaried employees and jointly apply for the loan, they can apply for a higher loan amount as their eligibility increases with the higher income. Thus they can opt for a property of higher value or reduce their own contribution.

For example, an applicant earnings 10 lakh annual salary is eligible for loan of Rs 50 lakh, as one can avail a loan amount of up to five times net salary. However, if the applicant's wife is also working and earns a similar amount, then the combined income becomes Rs 20 lakh. This pegs the combined loan eligibility amount at Rs 1 crore.

Moreover, if the first applicant has lower employment vintage or a poor credit score, making the spouse (assuming the spouse has better credentials) as the co-owner of the house, would strengthen their case. It may also happen that the lender might even sanction the loan depending on the income and the credit score of the wife, if the husband's loan application is not worthy to be processed and sanctioned.

Also, many banks offer a subsidy in the range of 50–100 basis points on the home loan rate if the first owner is the woman. This will reduce the monthly Equated Monthly Installment (EMI) and overall financial burden.

Reduction in stamp duty

Many states in India have female-friendly policies when it comes to property ownership listing the wife as the first owner. A property solely owned by a man member attracts a higher registration cost as against one owned by a woman. Hence, adding a spouse as a co-owner will help save on stamp duty charges and registration fees.

For example: A woman who applies for property ownership in Delhi has to pay 4% of the property's market value as its stamp duty, while a man has to pay 6%. Similarly, in Rajasthan the stamp duty for a woman is 4% of the property'a market value, while for a man it is 5%.

In rural Haryana, a woman property owner has to shell out 4% as stamp duty, while a man has to pay 6%. While in the urban area woman has to pay 6% as stamp duty, as compared to her male counterpart, who has to pay 8%.

Tax benefit

Property jointly owned by a married couple (if both are salaried) would enable each one of them to claim a maximum amount of Rs 1.5 lakh for principal repayment as income tax (IT) deductions under Section 80 (C). The individual income and the share in the property of each owner will decide the tax benefit that each is entitled to. Each of the joint owners can also claim Rs 2 lakh as interest payment under Section 24(B) of the IT Act. Tax benefits enable both owners to save a substantial amount of their income under this head. However, the total deduction sought under the IT cap should not exceed the actual payment of principal and interest on the loan amount.

Also, if the property that has a joint ownership is given on rent, then the tax levied on the rental income being generated also gets divided between the two partners. Hence, the tax burden gets distributed between the joint owners.

Succession

Lastly, when a property has a joint ownership of both husband and wife, its succession plan becomes a smooth process in the case of any eventuality of either partner. When the immovable asset is registered in the names of both partners, succession rules and regulations specify that this asset would go to the living partner after the demise of either of the joint partners. This saves a lot of legal hassles that might lead to lengthy paper works, with room for ambiguity in the succession plan.

The writer is CEO & ED, Essel Finance Home Loans