Real estate has traditionally been seen as an excellent long-term investment that is primarily unaffected by market conditions. However, growing aspirations plus a sharp market correction in real estate prices present a tempting opportunity many people do not want to pass up. As the markets remain weak, builders are pitching in with incentives such as free parking, waiver of stamp duties, semi-furnished homes, and so on to grab attention.
There is nothing more special than buying a second home. Whether you are buying a home for vacation or a rental property, you need guidance to decide. It would help if you took all necessary safeguards to guarantee that the investment does not turn bad. Before you go looking for a second home, here are a few considerations to keep in mind.
Points to Remember Before Buying Your Second Home
Here are some considerations to make before buying a second home.
- Purpose of the Property
It is essential to comprehend why you are purchasing a second property. Whether for personal use, as a holiday home, or simply an investment. One should understand how this asset will fit into your portfolio value. You can search for the location of the property based on its use.
Rental property in a prime location can help generate significant ROI and stable income. If the property is for self-use while on vacation, you will look at a separate set of parameters. When buying a second home, there are multiple options available in the market. However, make sure the location matches your need and use for the property.
- Evaluate Your Budget
Purchasing one property is expensive while investing in a second might be overwhelming. Therefore, a financial assessment is necessary before investing in a second home. First, you must evaluate your financial situation to understand whether you have the means to obtain a second home.
You are aware of the costs associated with buying a home and must decide on financial facts. Therefore, it is essential to establish a budget and look for property within your limits.
It is preferable to pay a larger down payment to reduce interest payments. As a result, prioritise your savings. Reduce all potential indulgences to save enough money to buy your second property.
- Apply For Bank Loan
You can also apply for a home loan to buy your second property. You can profit from the tax advantages of obtaining a second house loan. Section 80C of the IT Act, 1961 allows you to deduct the principal amount of your home loan EMIs up to Rs. 1.50 lakh every fiscal year. Additionally, the interest costs on loan are deductible up to Rs. 2 lakh every fiscal year as per Section 24(b) of the IT Act.
When buying a second house, keep in mind that you should never take a loan against the principal residence. This could spell trouble for you if an unexpected financial downturn occurs. You may potentially lose both of your homes. You can use a home loan calculator available online to determine the monthly EMI and the total cost of dwelling.
Purchasing a second home is an exciting decision. However, it is crucial to keep the above principles in mind to prevent any mistakes that could jeopardise your investment.