Monday, July 27, 2020

Top Things to Consider Before Buying a Second Home

Are you pining for a vacation or retirement home? Or, do you simply wish to invest in an appreciating asset for the future? If your answer is yes to any of these questions, it is time to consider purchasing a second home.

Is Buying a Second Home a Good Investment?

It depends on several factors – property location, buying purpose, overhead charges such as maintenance cost, resale value, etc. Generally, investing in a second property can bring-in higher ROIs via rental income and also offer your family a recreational space. 

Besides, housing loan eligibility is higher for second-home buyers. Add to it the spectrum of tax benefits they can avail on their home loan interest rate. Thus, invest in a second home if you’re financially capable of bearing its cost.

Here are the top points to consider before buying a second home.

Objective of Purchase

Buyers should have a clear goal of purchase (for rental or self-use) before investing in a second home. Only then, they should decide on the location, type, and size of the property for better returns. Moreover, this factor is significant as it also figures into your housing loan eligibility.

Potential Rental Income

If you’re planning to rent out the property for income generation, choose a location where the rental demand is high to earn enhanced monetary benefits. Besides, if you decide to take a full or partial home loan for the second property, rental income can help with paying off EMIs. Here is some advice - before applying for a home loan, use a home loan EMI calculator online to accurately calculate your monthly installments.

Property Value

Usually, the location of the property determines its market value. If you plan to use it as a weekend home or vacation home, consider factors like climate, views, maintenance need, potential rent, etc. These factors can estimate property appreciation that can enhance its resale value. Moreover, from the standpoint of finance, the property value is important as lenders also check your housing loan eligibility through property valuation.

Maintenance Cost

For any property, timely maintenance is essential to ensure functionality as well as resale prospects. Besides, improperly kept properties bring lower rental returns and sabotage capital appreciation. Therefore, do consider the maintenance cost of the second home as your home loan won’t cover it.

Cost of Borrowing

Depending on your savings and property value, you can take a housing loan to purchase a second home. Accordingly, you can choose a loan plan with suitable home loan interest rates and EMIs. However, in most cases, a home loan does not cover hidden charges like processing fee, registration charges, stamp duty, etc. Also, remember that the overall cost you incur on servicing the housing loan will impact the cost of your property as well.

Over to You

As examined above, buying a second home can be a good investment but overlooking the cost of borrowing is not a smart move. Therefore, use a home loan EMI calculator to estimate the cost of servicing a suitable home loan as various loan plans like the tailor-made home loan for self-employed, are available in the market.

Are you looking for housing finance? If yes, then turn to Tata Capital! We offer an attractive home loan interest rate and a hassle-free process. Check loan eligibility online on our website and file your application today!

1 comment:

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