Navigating Joint Home Loan Exit After Separation: Protecting Your Share

Rohan and Meera from Bengaluru bought a flat together in 2018. The property was registered 50-50, and both paid the EMIs, although Rohan contributed a little more. After they separated in 2024, Rohan wanted his name removed from the joint home loan, but the bank refused because Meera did not earn enough to take over the full loan on her own. They decided to sell the flat instead. Rohan asked for a larger share since he had paid slightly more, but the lawyers told them that the law follows the ownership stated in the deed. With no separate agreement, they had to split the sale amount equally.

Exiting a joint home loan after separation is not a straightforward process. The only legal way is through loan novation or refinancing, where the lender must approve shifting full liability to the remaining spouse. This requires proof of stable income and a good credit score.

“Simultaneously, the exiting spouse must transfer their ownership share via a registered gift or release deed. Without this dual process, loan restructuring as well as title transfer, both parties remain legally liable, even if they’ve separated,” says Apurva Agarwal, founder of Universal Legal, a law firm.

In the absence of such consent, which is often withheld where repayment capacity appears inadequate, the only lawful mechanisms are refinancing the entire facility in the name of the retaining spouse or effecting a sale of the property and liquidating the outstanding dues, says Tushar Kumar, Advocate at the Supreme Court of India.

Dividing sale profits when contributions differ can be a contentious issue. “If the property is jointly owned and individual shares are not specified, the law presumes equal ownership,” says Ashoo Gupta, Partner at Shardul Amarchand Mangaldas & Co, a law firm.

Sale proceeds will therefore be divided equally unless the parties have a written agreement specifying another ratio, even if only one spouse paid most EMIs or down payment. In a 2024 Supreme Court judgment, the court reiterated that sale proceeds must follow the ownership ratio as per the deed or documented agreement, not just financial contribution.

So, if your sale deed says 50-50, profits are split equally, unless a co-ownership agreement or memorandum of understanding (MoU) specifies otherwise. “Verbal understandings or EMI payment records carry little weight unless formalized. To protect unequal contributions, couples must register a clear agreement at the time of purchase or soon after. Otherwise, you're likely splitting proceeds equally, even if you paid more,” says Agarwal.

Charging rent or compensation after moving out is another complex issue. A co-owner cannot charge rent to another co-owner because each has an undivided right, title, and interest in the property. “However, compensation may be claimed if one co-owner prevents the other from accessing or using the property; or in divorce proceedings, the court directs the occupying spouse to pay rent/compensation or share maintenance charges,” says Gupta.

As of 2025, no legal precedent supports automatic rent claims just because one spouse left. To claim compensation, you’ll need legal proof of exclusion or a mutual agreement. If a spouse voluntarily lives elsewhere, courts may decline to award rent or compensation.

Understanding the tax costs during property transfer is crucial. The tax impact of moving the home fully to one spouse depends on how it is done. If the transfer happens as part of a genuine divorce settlement, Section 47 says it is not treated as a capital gains transfer, so the spouse giving up ownership does not face tax.

However, stamp duty, albeit often concessional for transfers between spouses, remains payable as per the State schedule. “Outside a divorce settlement, a transfer for consideration may attract capital gains in the hands of the transferor, in addition to customary stamp duty and loan-novation charges from the lending institution,” says Kumar.

Creating agreements before buying a home can save a lot of trouble. Given the complexities that surface when relationships deteriorate, prudent couples increasingly execute a written co-ownership or cohabitation-cum-property agreement at the inception of the acquisition.

“Such an agreement typically delineates the precise ownership ratio, specifies contribution obligations, records whether contributions are gifts or equity-creating, and sets out clear exit protocols, including valuation methodology, buyout timelines, and mandatory sale triggers,” says Kumar.

By codifying these rights and obligations at the outset, parties significantly reduce the scope for acrimony and ensure predictable outcomes in the event of separation. “Courts have recognised such agreements as valid under the Indian Contract Act, even though prenups aren’t binding in matrimonial disputes. Without this, the default legal presumption is 50-50 ownership,” says Agarwal.