Home loans: Benefits of co-borrowing

Our expert Harsh Roongta answers your queries regarding home loans.

My father, 62, sold a property, and the money from the sale rests in a capital gain account. We now want to purchase a new property. Can my father and I (a co-applicant) take a home loan to get tax relief?

I am 35-year old salaried professional and my gross annual income is Rs 12 lakhs. My father and I want to register the property in our names, so that we get avail of the capital gains and income tax advantage. Can it be done?

 

Harsh says: From the information you have provided, it is not clear whether the tax applicable on the property is Long-Term Capital Gains (LTCG) tax or Short-Term Capital Gains (STCG) tax. So, let's look at your case from two points of view:

STCG tax is applicable: You cannot save on tax even if you use the sale proceeds to buy a new property.

 

LTCG tax is applicable: You can save on tax if you use the profit earned from the sale proceeds, to buy property within a specified period of time.

 

Your father and you can take a joint home loan for a property, which is in both your names. However, your combined income should justify taking a loan.
 

Since you are both co-owners of the property as well as co-borrowers of the loan, you can get tax deduction benefits for the loan based on your respective share in the loan.       

 

My father wants to gift me, a property on which he took a loan. The bank sanctioned the loan to him based on my income statement. What will happen to the bank loan if my father gifts me the property?

 

Harsh says: Let's take stock of your current position. Your father is the owner of the property. A quick solution: you and your father can be co-borrowers of the loan. 

 

You will need the bank's consent to transfer the loan in your name. Also, the 'Gift Deed' will need to be stamped and registered at the applicable rates in most states.

 

The bank may or may not insist that your father remain a co-borrower despite not being a co-owner after evaluating your repayment capacity. You will also need to execute fresh loan papers in either case and the bank may charge a fee for the same.

Ask Harsh
  

 

Harsh Roongta is CEO, apnaloan.com , an online guide for retail loan seekers. Apnaloan also helps loan consumers get the best rates,  by making banks compete for their loan.