Factors to Consider before Buying a Second Home


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Buying a home is one of the biggest financial decisions that you make in your life. There are a lot of things that you need to keep in mind before deciding the right house. This holds true for buying your second house as well, whether for residential purposes or investment. Let us see some of the important factors that you need to consider before buying your second house:

Affordability: Calculate all your expenses and incomes before buying a second house. In case, you are planning to use it as a source of rental income, ask yourself if you will be able to get enough rent from the property. If you are buying for investment purposes, then you should consider capital appreciation. But, if you are buying it for other purposes, say for spending your vacation then it is wiser to consider the number of days that you will spend there and the costs involved in maintaining the same.

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Location of the house: Location and size are two very important factors to consider when buying a house. Be it for rental purposes or leasing out or a possible resale, you should always choose a prime location or at least a location that has a good scope for development in the future. You should also be aware of the maintenance costs of your second house. It usually depends on the type and size of the property; whether it is a flat or a single bungalow.

Tax benefits on second home loan: If you are planning to buy your second home for rental income or saving tax, then take into consideration its tax implications also. As per Income Tax rules if you own more than one house, then only one house is considered as self-occupied while the other houses owned by you are considered to be rented out, even if that is not the case in reality. Whatever you earn in terms of rental income will be subject to taxation. In case, you have bought the house by taking a loan from banks or other financial institutions, you can claim a deduction for the interest paid. The maximum deduction on interest is now capped at Rs. 2 lakh, against the entire interest that was tax-free earlier. However, there is a provision to carry forward the losses in eight consecutive financial years.

Know all about tax benefits on a home loan

Loan amount: The loan amount will depend on the value of the property and your monthly income. Banks like to keep the EMI amount to less than 50 percent of your salary. The loan amount to be sanctioned could go down in cases like you are still paying EMI for your first house or have taken up other forms of loans like a personal loan. However, a joint home loan with your spouse could get you more loan amount but this again depends on many other factors. Based on the value of the property, you can get 75-90% of the property as a loan. Also, remember that you are required to pay the rest amount as a down payment. Most mortgage lenders require a down payment of 10-25 percent to approve your house loan.

Inspection of the property: You should run a thorough inspection of the property before you put your money down. Your home loan lender will probably advise you to opt for Home loan insurance and home loan. This will safeguard your property against various types of damage.

Other factors: Apart from the above-mentioned factors, there are other common factors that one should consider before buying any number of houses. The price of the property, its location, the reputation of the builder, age of the building, its design and layout, quality of construction and the legal status of the building should be considered before buying the property.

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Conclusion: Now that you know all about the things to consider before buying a second home, analyze the pros and cons before making a decision. Also, don’t forget to compare across lenders when going for the second home loan.

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