Taking a joint home loan with your loved ones could be risky. Here’s why
Risks and complexities of taking a joint home loan: Taking a joint home loan with your loved ones is a significant financial commitment. While there are some benefits of taking a home loan in joint names, there are several potential risks and complexities that you should consider before making such a decision.
According to Atul Monga, CEO and Co-Founder of Basic Home Loan, there are two financial risks linked to a joint home loan:
Default Risk: If one borrower is unable to make their share of the mortgage payments, it could impact the credit scores and financial stability of all co-borrowers. This could lead to foreclosure and loss of the property.
Liability for Full Debt: Each co-borrower is typically jointly and severally liable for the full amount of the loan. This means that if one borrower defaults, the others are responsible for the entire remaining balance.
Monga says if one borrower faces financial difficulties, it may lead to missed payments, late fees, or even foreclosure. This can put a strain on relationships and trust among co-borrowers.
Conflicts and Disagreements: Further, there could be conflicts and disagreements over several issues among co-borrowers, such as:
Usage of the Property: Disagreements may arise regarding how the property is used, whether it’s a primary residence, a rental property, etc.
Maintenance and Upkeep: Disputes might occur over responsibilities for maintenance, repairs, and associated costs.
Selling the Property: Deciding when and under what circumstances to sell the property can be a contentious issue.
Differing Opinions about Property-related Decisions: “Different co-borrowers may have varying ideas about renovations, improvements, or even day-to-day management of the property.
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