Are you thinking of buying a second home? Whether you intend to do so as an investment, a getaway or simply for your retirement, you definitely need to plan your purchase carefully, especially if you’re looking to take a Home Loan. Here are seven factors to consider before you consider purchasing a second home.
- ONE: Does a second home make sense?
Consider all your expenses before you take that leap. Think about how your expenses will change (increase) once you have that second home.
In case you are planning to use the second home as a source of rental income, ask yourself if you will be able to get enough rent from the property. Enough to at least cover its monthly maintenance expenses, maybe?
Additional Reading: Factors To Consider Before Buying A Second Home
- TWO: Where is the house? How big is it?
Location and size are two very important factors to consider when buying a house. Many people buy a second home to use as an investment or for rental income. In this case, a buyer must carefully consider the location of the property and analyse whether the rent received will be a decent sum. Will you get tenants for the property easily?
You will also need to spare a thought about the maintenance costs a second home will bring with it. This is generally decided by the type and size of the house; whether it is a flat in an apartment building or a single bungalow.
Additional Reading: Important Tips On Buying A Home
- THREE: What are the tax implications?
For a buyer considering a second home, two taxes will be important to consider. One is the property tax levied on it and second is Income Tax if the house is to be rented.
Additional Reading: Tax Implications On Your Groovy Second Home
- FOUR: How do your short term and long term financial reserves look?
It is rather common for home buyers to finance their purchase of a home with a down payment and a Home Loan. Remember, the larger the down payment is, the lower your loan amount will be. A down payment is usually 20% of the property’s sale price.
Find a Home Loan that suits your pocket and is easy to repay. Don’t choose one in haste. There are various factors to consider when choosing a Home Loan lender so make sure you think long and hard before making any decisions.
Additional Reading: How To Select Your Home Loan Lender
- FIVE: Do you have any out-of-the-box methods to raise funds?
Try and think of some unusual methods to finance the purchase of your second home. (No. We don’t recommend robbing a bank!) Think about borrowing from family or close friends. You may be able to save on interest by keeping it within your circle of friends or family.
Additional Reading: 5 Reasons Why You Need A Budget For Your Home
- SIX: Are you prepared to become a landlord?
If you are considering the idea of renting or leasing out your second home, have you thought about the various responsibilities that come with being a landlord? Will you be up to the task of understanding the intricacies of rental agreements and lease deeds? Think about it.
- SEVEN: You should protect your second home
Yes, even before you buy the property. To begin, you’ll want to 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 Insurance. This will safeguard your property against various types of damage.
Think you’re ready for a second home?
Additional Reading: Read our Home Loan Handbook