Summary of this article
Buying a house with a brother or sister can make it easier to manage the cost. But both need to know what they are signing up for, especially when it comes to paying the EMIs and deciding who owns what share of the property.
Before going ahead with a joint home loan, siblings should sit down and work out the details. Who will pay how much towards the EMI? What will be each person's share in the house? These are questions best answered before the purchase.
A joint home loan may make homeownership possible for siblings who would find it difficult to buy on their own. But they also need to think about tax benefits and what happens if one of them wants to sell their share or move out of the arrangement later.
Buying a house with a brother or sister isn't the most obvious financial decision, but it can be a practical one. If a brother and sister pool their incomes and savings, they may be able to get a bigger home loan, share the down payment and split the monthly repayments. It could also be a way to co-invest in an asset.
Buying property with a sibling is more than just a shared financial goal. Both need to know who owns what, how the costs will be shared and what happens if one of them wants to pull out of the arrangement. The siblings can jointly own the property in India, but the home loan is subject to the lender’s policy.
If you are considering a joint purchase this Bhai Dooj, here are five things worth discussing before taking the next step.
1. Check If The Lender Allows Siblings To Apply Together
The first step is to determine the lender’s policy. Not all banks and housing finance companies allow brothers and sisters as joint applicants. Some may have conditions based on the relationship between applicants or if both plan to live in the property.
Says Atul Monga, CEO and co-founder of BASIC Home Loan: “Even if the combined income is sufficient, credit scores, existing loans and repayment capacity will be crucial for the application. It is better to check eligibility before selecting a property or paying the booking amount.”
2. Calculate The Ownership Percentage
A common mistake is thinking that sharing a home loan translates to equal ownership. A co-borrower is responsible for the loan’s repayment, while a co-owner holds legal ownership of the property.
For example, a brother and sister buy a house for Rs 80 lakh, pay Rs 20 lakh for the down payment and take a Rs 60 lakh loan. In this case, they have to decide whether they will own the property equally or in unequal proportions.
“They may choose equal ownership, with each holding a 50 per cent share, or agree on different proportions based on their respective financial contributions and understanding. These ownership shares should be clearly specified in the registered sale deed, rather than assumed from how the loan repayments are divided. Seeking legal advice while finalising these terms can help ensure that both siblings' ownership rights and financial interests are clearly defined from the outset,” says Monga.
3. Figure Out Who Is Paying What
Suppose two siblings borrow Rs 60 lakh to buy a house, at 8.5 per cent interest for 20 years. The EMI comes to roughly Rs 52,070 a month.
“They could simply divide it equally, paying about Rs 26,035 each. But what if one earns more than the other? In that case, they may decide to share the burden according to their incomes. If one sibling earns Rs 80,000 a month and the other Rs 60,000, the former would pay around Rs 29,754 towards the EMI, while the latter would contribute Rs 22,316,” adds Monga.
There is one important point they should not overlook. The bank will not be concerned with how the siblings have decided to divide the EMI among themselves. Both are borrowers and both are responsible for the loan. If one stops paying their share, the other may have to step in to ensure that the EMI is paid in full. They should also settle in advance how other expenses, including stamp duty, registration, property tax, society maintenance and repairs, will be shared. These costs can add considerably to the expense of owning a house.
If siblings jointly take a home loan, both can claim tax benefits. But there are a few terms. A general rule is that each must be a co-owner and have an interest in the loan to be entitled to allowable deductions.
“The benefits are subject to the relevant income tax rules and the selected tax regime. Being a co-borrower doesn't automatically mean both qualify. It is a good idea to check the current rules with a tax professional before putting these savings into the financial plan,” says Monga.
4. Discuss What Happens If One Wants To Exit
A joint purchase may work well today, but circumstances can change over the years. One sibling may move to another city, need money for a different commitment or decide to sell their share. Talk about this possibility before buying. Can one sibling buy out the other's share? How will the property be valued? What happens to the outstanding loan? It is also important to consider succession planning and what will happen to each sibling’s share in the event of their death.
A Home Together, With Clarity From The Start
Purchasing a home with a sibling can be a wise way to share the expenses of owning a home. But it is important not to base financial decisions on assumptions, no matter how strong the relationship is.
If a joint home purchase is in the cards this Bhai Dooj, discuss everything openly and, more importantly, record the agreed terms in writing. You may be family, but a property purchase involves a sizeable financial commitment. It is better to settle any differences now than argue over them later. After all, the idea is to own a home together, not to let the house become a source of friction between siblings.
