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Important Factors to Consider before Buying a Second Home

By Finserv MARKETS - Jul 29,2019
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Factors to consider before buying a second home

Purchasing a new home can be a major financial decision – probably one of the biggest in your lifetime. There are a few factors that you need to consider before narrowing down on a home. These considerations hold true for purchasing your second home as well. You could be buying the property for residential or investment purposes, but these essential factors could help you make a prudent decision:

Location and size

There are two critical factors to consider before making an investment – the size and location of your new home. Whether you are making the purchase for rental or potential resale, you should select a prime location or one that has scope for development in the coming years. Depending on the size and type of the home, you should also be aware of the maintenance costs associated with the property.

Affordability

If you are looking to purchase a property for a source of rental income, you should select a location that draws an adequate amount of rent. If you are making a purchase for investment purposes, you should take into account the capital appreciation on the invested amount. Even if you are buying the property as a getaway from the daily routine, think about the number of days you would spend there and the associated costs for maintenance.

It is essential to ask yourself if you can afford the purchase and if the investment is a well-thought-out decision. If you are taking a home loan to fund the purchase, you should think about your ability to pay monthly EMIs and any outstanding payments for existing loans.

Tax benefits

Buyers might purchase a second home for rental income or tax savings. In these cases, you need to consider the tax implications under the Income Tax Act, 1961. If you own two homes, only one property will be considered to be self-occupied while the other would be taken as a rental property. Any earning considered as rental income is subject to taxation. If you fund the purchase through a bank loan, you can claim deductions for the interest payments.

The maximum deduction for this is capped at Rs. 2 Lakh. This is applicable to the entire interest that was previously considered tax-free. However, it is important to note that these losses can be carried forward for eight financial years. If you are funding the investment with a home loan, you should browse through the offerings available on online platforms such as Finserv MARKETS. Finserv MARKETS hosts products like the Bajaj Finserv home loan for an affordable solution to your financial needs.

The loan amount is dependent on the market value of the property and your income. If you already have pending loans due for repayment, your home loan provider might reduce the amount sanctioned. Ideally, you can fund 75-90% of the property with this product. The rest of the amount has to be paid as down payment.

Mortgages

Before deciding on a place, you should think about the financial burden associated with the additional expenses. The monthly EMIs can significantly impact your cash flow. If you are purchasing a home for investment purposes, think about the tax benefits and the terms and conditions associated with the new property.

Before you finalize on a property, you should conduct a thorough inspection of the property. Besides vital considerations such as the price of the property, the builder’s reputation, and the age of the property, you should also think about the quality of the construction and legalities associated with the home.

While looking for a home loan product to fund the purchase, you could browse for Bajaj Finserv home loan option at Finserv MARKETS. You can use the home loan eligibility calculator to check if you qualify for the product. Home loans are a useful option due to flexible repayment options (up to 300 months), balance transfer and top-up options, associated insurance plans, and complimentary financial reports.

These loans, at times, come with zero prepayment and loan foreclosure charges. In addition, under the Pradhan Mantri Awas Yojana, eligible first-time applicants can access lower EMI requirements and interest rates. Digital lending enables you to purchase a home loan online in a few convenient steps. In order to qualify for the loan, you should be an Indian resident with three years of experience as a salaried individual or four years of business experience, In addition, you should be between the ages of 23 and 59 years if you are a salaried employee.

Before you select a home loan product, make sure that you scout through available policies in the market and their associated benefits. Selecting a home loan plan from a trust able provider will ensure a hassle-free and convenient process and expert guidance on your application.

Also, read about prepayment of home loan.

Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522