SUKANYA KUMAR Founder & Director, RetailLending.com | Sep 18, 2014, 05.21 PM IST | Source: Moneycontrol.com
There was time when buying your own home was the biggest achievement in anyone’s life. Although this still remains a great achievement, homebuyers are keenly looking at purchasing a second property as an investment and security for the future of their family.
There was time when buying your own home was the biggest achievement in anyone’s life. Although this still remains a great achievement, homebuyers are keenly looking at purchasing a second property as an investment and security for the future of their family. Individuals, today, are considering a second purchase as young as 40. Many of us feel obtaining a home loan for the purchase of your second home is a cakewalk. Think again! There are things one should know when obtaining a second home loan to ensure it’s as easy and beneficial as the first one. Let’s take a closer look at the questions you may have while preparing to go in for a second home loan.
Am I eligible? How much loan can I get?
It is important to understand that the loan terms for your second home loan need not be the same as your first. There may be higher costs you would need to incur upfront, and the terms of the loan could be more stringent as the banks need to be sure of your ability to repay as you already availed one home loan. Moreover, though banks finance up to 75% of the value of the house, if the loan amount is above 75 Lacs, they may reduce this percentage for the second Home Loan. In case of a second home, banks derive that it is for ‘investment’ as you already own a home. There may be a possibility of a higher interest rate for your second home loan from some lending institutions. It is important to understand your eligibility before putting in the effort of applying for a second home loan; it may also be wise to consult a home loan expert as this process can get complicated.
Generally, the home loan amounts will depend on your down payment and your monthly income along with assessment of your other investments. In case you are already paying an EMI for your first house or have other loans such as personal, car, or educational, the home loan amount offered by banks can be even lower. Your age is also a factor. The tenure you opted for your previous loan may be reduced now, resulting into increase in EMI and effectively decrease in the loan amount. One may want to opt for joint loan with their spouse for incremental loan amount, but the older person’s age will be considered for the loan, which may not be known by the borrowers. This is where expert assistance can help you to understand what to expect from your home loan in terms of amount, tenure etc. and the best product to suit your need.
Is there a tax benefit on a second home loan?
A second home loan can reduce your overall tax burden. As we all know, a home loan taken on your first self occupied property is eligible for deduction for Rs. 1 lac of the principal amount under section 80C and Rs. 1.5 lacs (revised now to 2.5 Lacs in the latest budget) of the interest paid under section 24. For a second home loan, only the interest payable is eligible for a deduction. But here is the good news: There is no limit on the deduction on interest paid for second home loan if it has been given on rent. A second home loan can definitely help to save on your overall tax burden, and to ensure you can get the most out of your second property, one can consult a home loan expert who can guide you on these aspects.
Buying a second home is a great feeling of accomplishment, but there are things one should be careful of before taking the final decision. Having a home loan expert on your side is a good way to ensure you are making the right decisions regarding your second home loan purchase, and the task may not be as daunting as it sounds. With the right team, it just may just be a cakewalk again!
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