Joint Home Loan: What Happens To The Property And EMI After A Co-Borrower’s Demise

A joint home loan brings two borrowers under the same loan agreement, but their loan liability and ownership in the property are not necessarily the same thing. This becomes important when one borrower passes away before the home loan has been fully repaid. The surviving borrower may have to take care of the outstanding equated monthly instalments (EMIs).

What Does The Loan Agreement Provide

Joint borrowers are treated as jointly and severally liable for the home loan. In simple terms, the lender can seek repayment of the outstanding amount from either borrower, subject to the loan agreement.

Therefore, after one borrower’s demise, the surviving borrower can be required to pay the EMI on the outstanding loan. The contribution made by each borrower during the loan period does not necessarily change this obligation. Even where one borrower had been paying a larger portion of the EMI, the lender’s rights are determined by the terms of the loan.

The House Is A Different Matter

Ownership does not change simply because one person takes over the EMI. The title documents determine the ownership of the property. The share belonging to the borrower who passed away is dealt with under succession law or the terms of a valid will.

Let’s say two siblings own a house jointly. If one sibling passes away, the other may have to pay the outstanding home loan, but it does not automatically give the surviving sibling the other half of the house.

The deceased sibling’s share can pass to their spouse, children or other legal heirs, depending on the applicable succession rules and whether there was a valid Will.

When The Co-Borrower Is A Friend

A similar situation can arise when the co-borrowers are friends or other unrelated individuals.

Banks can provide joint home loans to unrelated borrowers, subject to their lending conditions. If one friend passes away, the other borrower can still have to repay the outstanding loan.

The property share, however, is a separate issue. 

The deceased friend’s interest in the house can pass to their legal heirs. It does not automatically become the surviving friend’s property because that person is paying the EMIs.

What If The EMI Is Not Paid

The outstanding loan does not disappear after a borrower’s demise. If the surviving borrower fails to service the repayments, the lender can initiate recovery proceedings as written in the loan agreement and applicable law.

The estate of the borrower who passed away can also have liability for outstanding debts, subject to the applicable legal provisions and the assets forming part of the estate.

As a result, the person who carries the home loan after a co-borrower’s demise may not be the same person who eventually inherits that borrower’s share of the property.