Buying a home together: Should I book my flat with my wife, what happens if we decide to divorce?

My wife and I, both salaried, are planning to buy a house jointly and take a home loan together. We understand that applying jointly increases loan eligibility, may help negotiate better interest rates, and provides tax benefits on both interest (u/s 24(b)) and principal (u/s 80C). However, we are also concerned about potential risks such as divorce, critical illness, or the unfortunate death of a co-borrower. Could you please clarify:

What financial safeguards should we consider? In case of separation or illness, how would the loan repayment responsibility be handled?

Advice by Akhil Rathi, Head – Financial Advisory at 1 Finance

Purchasing a home jointly with your wife comes with several benefits, including higher loan eligibility, shared financial responsibility, possible interest rate concessions for female applicants, and greater tax advantages under Sections 80C and 24 of the Indian Income Tax Act. It also simplifies succession planning through the right of survivorship. To move forward, both spouses must be listed as co-owners on the sale deed and apply for a joint home loan, allowing your combined income to enhance both eligibility and repayment capacity.

Protect first

Buying a home together works best when you protect first and borrow next. If both spouses will pay EMIs, each should have an individual term insurance policy sized to at least their share of the outstanding loan, and ideally more, depending on dependents and expenses. If only one spouse pays, that person must hold full-term insurance cover. Add family health insurance, along with a modest critical-illness or personal-accident policy to handle income shocks, and maintain an emergency fund covering six to twelve months of living costs plus EMIs. Prefer a plain level-term policy over lender-bundled covers so protection remains portable even if you refinance.

For an extra safeguard, consider taking the husband’s term policy under the Married Women’s Property Act, 1874 (MWPA). This creates a trust for the wife and/or children, ensuring the insurance payout cannot be attached by lenders or other creditors. Choose beneficiaries carefully, as they typically cannot be changed without their consent—even if the couple later separates.

Ownership and repayments

Structure the ownership and repayments cleanly: make both spouses co-owners and co-borrowers in the same ratio in which you intend to claim tax benefits, route EMIs through a joint bank account for transparency, keep nominations updated on the loan and property, and draft simple Wills to avoid delays in succession. If the relationship changes or illness strikes, banks treat co-borrowers as jointly and severally liable, meaning either spouse can be asked to pay the full EMI. In practice, the loan may be transferred to one spouse (subject to eligibility) or settled by selling the property. During medical or income interruptions, it’s best to approach the lender early to explore a moratorium or tenure adjustment.

Tax benefits

Adding your wife’s name when purchasing a property offers several financial and tax advantages. One major benefit is the potential reduction in stamp duty by 1–3%, depending on the state, which can lower overall property costs. Co-ownership also allows both spouses to claim Income Tax deductions under Section 80C on home loan principal repayment of up to Rs 1.5 lakh annually. Additionally, interest paid on a home loan is deductible: up to ₹2 lakh for a self-occupied property, or the full amount if the property is rented out, provided both co-owners have separate incomes.

Banks may offer a lower interest rate on home loans for women, typically up to 1% less per annum, though it varies by lender. However, clubbing provisions apply: if the property is in the wife’s name and she is financially dependent, rental income will be taxed in the husband’s hands.

In conclusion, buying a home jointly is not just about securing a loan, it’s about securing peace of mind. A well-built protection layer of term, health, and critical illness cover, backed by an emergency fund, ensures that life’s uncertainties don’t derail your finances. Clear ownership, proper nominations, and clean documentation safeguard both partners’ rights, while provisions like MWPA offer additional family security. For taxes, interest under Section 24(b) and principal under Section 80C generally favour the old regime when deductions are substantial.