Jointly purchasing property with a brother or sister can simplify the realization of a housing dream, as combining the incomes of two people increases the chances of obtaining a mortgage loan and expands the budget for buying a home. However, joint ownership of real estate and a loan requires the consent of both siblings on all major decisions. Therefore, before purchasing, it is necessary to consider how the situation with this shared investment will change if the circumstances or plans of one of the participants change in the future.
Atul Monga, CEO and co-founder of Basic Home Loan, notes that generally there are no legal prohibitions against purchasing property jointly with a brother or sister. Nevertheless, the possibility of both siblings obtaining a mortgage loan depends on the policy of the respective bank or lender and the structure of the loan itself. Some lenders may allow siblings to act as co-borrowers under certain conditions.
Consider an example: if a house worth 10 million rupees is purchased, both siblings can make a down payment of 2 million rupees, taking out a mortgage loan for the remaining 8 million rupees. Initially, such a scheme may work well if they both make equal EMI payments. But after five years, the situation may change if one of them moves to another city, gets married, needs money for other investments, or wants to exit this agreement.
Therefore, it is highly advisable to determine in advance what share of the ownership will belong to each person, who will participate in the down payment and EMI payments, and what the procedure for exiting this arrangement will be if necessary. Considering these issues at the initial stage is much wiser than after disputes arise.
It is important to understand that a co-owner and a co-borrower are not always the same person. Ownership is determined by the property documents, while the responsibility of the co-borrower is to repay the loan amount. Many lending schemes require that all property owners also be applicants (Co-Applicant).
Neither sibling can unilaterally decide to sell the entire joint property, as the rights of the other owner are also important. Therefore, it is useful to decide in advance whether the other owner can buy out the share if one decides to leave, how the property value will be determined, and what the exit procedure will be if there is still a mortgage outstanding at the time of sale.
The consent of both owners is necessary regarding renting out the property. It is also advisable to agree in advance on the ratio in which rental income and maintenance costs will be distributed, who will be responsible for tenant-related duties, and what will happen if one sibling wants to live in the house while the other wishes to rent it out.
This can be the most serious risk associated with joint mortgages. If both siblings are co-borrowers, one person's failure to pay the EMI does not relieve them of their responsibility to repay the loan. If a payment is missed, the other borrower may have to cover the entire debt. Constant payment delays can negatively affect the credit history of both borrowers.
Furthermore, other scenarios must be prepared for. For example, what happens if one of the siblings dies, faces financial difficulties, or wants to withdraw from this joint agreement during the loan term?
Therefore, it is best to include points such as ownership share, contribution to the down payment and EMI, maintenance costs, rental income, insurance, inheritance rights, and the exit procedure into a clear agreement.