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Check Points for Buying a Second Home with Home Loan

Caution for Buying Second Home with Home Loan

Home Loan Comparison Between HDFC Bank and SBIBuying a second home is either an investment decision or gateway for retirement plans.  It is good to hear that you are in a plan to purchase a new home while you already own one. People who cannot settle for fewer earnings in their life would go for these second home as an investment plan. With the rising prices in the real estate sector, a right investment in the right property will fetch you more in future. If you are planning for a second home purchase with a home loan as part of your investment plans, location in which you buy a home plays an important role in appreciation. What should you look in while purchasing a home with housing loan?

Can you afford a second home?

Analysing your current income and expense ratio is very important for taking a decision on your second home purchase. Check the expenses that you are going to incur additionally on purchasing a new home. Will you be able to afford the EMI comfortably without straining your current expenses?  Straining your expenses to afford a new home loan EMI is not a wise option because these loans are big and have a long tenure. Saying yes to strict budgets might not be possible for the long term.

Does it make sense to buy?

Some people plan a second home as an investment and few treat it as a source of income. If you are buying the home as a source of rental income, plan to purchase it in the area that has accesses to all key locations so that you can earn good rental income so that you can easily afford part of your monthly housing loan EMI. You should also consider the maintenance cost that you are going to incur while purchasing home.

Tax implication

The first time home buyer will be benefited with the tax deductions when they consider buying a home with the help of the home loan because the government offers this benefit to encourage people to own a home in their lifetime. While purchasing the second home, the buyer must take two tax implications into consideration, one is a tax levied on the property and the other is the tax levied on your rental income if you are buying another home as a source of rental income.

Choose your loan tenure right

As you are buying a second home with the help of housing loan, you must be aware that taking a home loan comprises of down payment and interest rates. In most of the cases, down payment occupies 20% of total property value. If you think you can afford more after analysing your income expense ratio, go for it. Larger down payments in housing finance will reduce the loan amount by impacting your loan tenure and interest rate. You can choose to go with the short loan tenure if you can afford to pay big EMIs. Choosing the long tenure is a wise option If you are young enough to earn and keep EMIs pocket-friendly.

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