Owning a home is exciting, but owning a second home feels exhilarating and you suddenly feel like the nouveau riche! But it’s not only the wildly rich ones who can afford a second home, some people simply buy a second home because they want a convenient apartment for their retirement or they are looking for a holiday home in a different location. And then there are others who are looking for an investment source as the stock market doesn’t appeal to one and all. And the thought of owning a property on the ground always feels more sound than investing in something that you have no physical proof of, aside from a piece of paper!
That said, home buying isn’t something you do on an impulse, but after taking cognizance of the current market trends as well as your financial stability. People usually hit their middle-age before they are financially comfortable to think of a second loan against property. A second home is usually bought as an investment for giving out for rent, or for holding for some time before selling at a higher price.
With the current trend of low interest rates, it’s advisable to take the plunge now -for those who are financially ready for it. It’s the ideal time when you can fix your EMIs at a decent rate and freeze them for the next twenty years or so; this will benefit in the long run as rent rates are only going to go up higher, so your income from the investment would be on a rising gradient, which is what you need. Aside from the steady income, you will also be eligible for the tax benefits, so it’s a win-win situation all around! The current tax code is finally tilted in favor of home ownership, so if you are financially stable, it’s the right time to take the plunge.
There are a lot of factors to be considered before going in for such a venture, some of these include:
- Proximity to good schools, hospitals and shopping facilities.
- Low crime area.
- Reliable transportation options.
- Decent safeguards and insurance on your new investment.
- Buy from a reputed realtor who is known for timely deliveries, as you would be losing rent money with over-due delivery dates.
- Buy in core business areas as it’s easier to book profits within a year or two from such high-demand areas.
- Think short-term and think resale when searching for a second home.
- You should be financially sound with at least six months worth of EMIs and living expenses saved up in case of income losses.
- Do not use your current home as a security deposit for your next home; you could end up losing both in the worst case scenario of being unable to pay up the EMIs.
- Type of loan matters as it should fit your goals and financial situation. If you are in a position to make extra repayments, a good option would be to go for a variable loan as against a fixed loan, which would bear a hefty penalty to close earlier than the due date.
Hopefully, these pointers will help you decide whether it’s time for you to take the plunge for a second home or not!