When you think of more than one name to be listed on the mortgage application, you probably assume it to be a married couple. However, there are multiple people apart from just the spouse who enter into buying a home together – parents, extended family, siblings, friends and even non-married couples.

On a brighter side, dividing the burden of buying a home through a home loan and all that goes into being an owner of a property often creates a condition that wouldn’t be likely for any of the borrowers on their own. However, committing on something as big and complex as sharing a home and its mortgage with someone certainly means that you would have a long-standing financial obligation. While having a joint ownership of a home is definitely a suitable idea, however, it works well only if all the parties are on the same page, and equally prepared to share the financial commitment with each other. One challenge with sharing the mortgage is if one of the parties suddenly stops paying or are unable to pay their due share, it ultimately affects the entire cycle with possible future credit damage for you.

Co-ownership examples

There are no specific lending rules against purchasing a home with someone who is not a family member or your spouse. Some common relationships that are often witnessed owning a house are as follows –

• A child who is 18 years or above, buying a house with his or her father/step parent
• Co-ownership with a partner, fiancé, boyfriend, girlfriend, etc.
• Two complete unrelated individuals owning an investment property together
• Two or more families jointly buying a larger home to stay together

While buying a house with one of the family members or your spouse is a great benefit of adding them as a co-owner, but there are some facts for you to review before deciding on whether you need to go for a joint property ownership or not –

• First and one of the most important things to remember, one does not become a co-owner of the property by just becoming the co-borrower during the home loan application. However, wives need not be concerned about this fact as far as ownership is concerned, since the Marriage laws permit a wife to become a co-owner of a property purchased by her husband after marriage
• The property papers need to clearly define each co-owner’s share in that property. This helps in avoiding any future conflicts on ownership and also with concern to fix the tax liabilities. In a scenario where the husband wants to give a larger share of his property to his wife, he needs to clearly state so in the property related documents
• If a wife is one of the co-owner, she cannot claim on the tax benefits unless she has been a co-borrower. This is one of the reasons why most borrowers are advised to make their wives a co-applicant in their home loan application
• In a case of joint-home loan, the repayment history would be reflecting on both co-borrowers.

Like stated above, in case of the borrowers default on payments, the credit worthiness of the other borrower also gets hampered

Property rights and taxation

As per the Transfer of Property Act, a co-owner has an equal amount of right on the entire property. So any transactions to be carried out with respect to the property needs to have consent of all the co-owners. This also means, if the property is ever sold, the co-owners would also have to pay tax on the capital gains earned by each one of them.