Co-ownership of a property ensures a number of benefits, including greater loan eligibility and tax advantages. It can be difficult for someone earning a typical salary to collect the significant sum of money necessary to buy a home or apartment quickly. Even if decades of saving the result in the requisite amount, inflation will prevent the majority of individuals from buying their dream homes when they are young. Furthermore, home loans might not provide you with enough money to buy the house you want.
Therefore, one of the best possibilities is shared ownership of the property. You can jointly own property with one or more members of your family using this method. But is it really worth it? What exactly does joint ownership of property mean?
What is joint Ownership?
Joint ownership of property is any asset owned in the name of two or more people. These two people might be business partners or belong to another group of people who have a shared interest in property ownership. When two people are husband and wife, they have marriage status and can own assets together.
A variety of legal structures, such as joint tenancy, tenancy by the entirety, community property, or a trust, are authorized and are comes under the joint ownership of property.
What are the legal implications of joint property rules in India?
In terms of co-owner rights, Section 44 of the Transfer of Property Act, of 1882, addresses a co-transfer owner’s and the buyer’s rights in this scenario.
Each co-owner is granted joint registration of the property right over the entire property under the terms of this provision. This indicates that each co-owner has an equal interest in the property. To put it simply, each co-owner is entitled to their designated portion of the co-owned joint registration of property, which includes every square inch of the land. In other words, a tenant in common is only entitled to the share of the property that they hold, not the whole thing. These co-tenants have a maintenance obligation to the entire property; it cannot be partitioned in any way based on their own interests.
Accordingly, only the joint property rules in India would be transferred if they sold their respective shares of the property.
This leads us to the next inevitable question, Should you be choosing joint ownership?
What are the advantages and disadvantages?
The joint registration of property benefits is given below.
- Increased eligibility for loans
Increased loan eligibility is a significant advantage of co-owning property. When a borrower applies for a house loan, banks determine the maximum loan amount that can be approved based on the applicant’s net monthly take-home pay (before existing EMIs). Buyers can apply for the loan jointly if a bigger loan amount is necessary by designating themselves as co-owners. Banks readily approve a larger loan amount if the total monthly take-home pay is higher. Additionally, when there are multiple applicants, lenders are more likely to favor the option because the likelihood of credit losses is reduced.
- Flexible payment terms
Other advantages of joint ownership of property involve applying jointly for a mortgage not only increases loan eligibility but also simplifies the repayment process. Co-owners are able to plan their own EMI strategies. The decision of how much each applicant will contribute to the repayment is entirely up to the borrowers.
- Effortless property transfer
A property in shared possession is advised by experts since apartments are becoming more and more popular among homebuyers. According to regulations, in the event of a sudden death or accident, the property may be passed to the remaining owners (shareholders) without the need for a formal investigation. Simply registering the property again in the name of the new proprietors in the presence of an attorney is all that is necessary.
- Easy EMI option
As you are already aware, buying a home with a partner increases your chances of being approved for a mortgage with a large principle amount. The benefit goes further than that, too. If you apply for a house loan with one or more co-owners, you can pay the EMIs more simply. You will only be required to pay a portion of the full monthly installment. You have the option to choose the other co-owner in addition to the ratio. According to your convenience, you will only need to use this method to pay a fraction of the EMI.
Disadvantages of joint property ownership
Although shared real estate ownership has many benefits, there are a few disadvantages as well. Here are the two major drawbacks of joint property ownership:
- Lag in Documentation
The loan application process clearly involves multiple parties who have joint ownership. As a result, lenders frequently take longer than usual to process all the necessary paperwork. Lenders must ensure that all documentation related to each and every co-owner is authentic in order to prevent fraud. Due to the two- to three times longer than typical paperwork process, the application and loan approval processes are completely delayed.
- Repercussions on credit history
All co-owners are liable for paying the home loan’s EMI jointly when you and the other co-owner(s) apply for a mortgage with joint ownership of a residential property. As a result, if one co-owner does not pay their EMI on time for a given month, the entire EMI will be defaulted, severely harming the credit reports and CIBIL ratings of all joint owners.
How to Make Co-Ownership Work for You
Co-ownership of an asset can apply to a variety of things, including a company, real estate, car, brokerage account, business, or estate. The nature of the situation and its requirements in terms of things like revenue, tax, law, and finance will play a big role in determining whether co-ownership with another person or group represents a beneficial or risky arrangement.
Conclusion
It’s critical to understand the agreement one makes with the co-owners before engaging in a real estate transaction. Knowing these ideas makes it easier to identify one’s rights in situations like death.
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