Things to know before getting a home loan for your second home

Linda J. Dodson
Buying a Second Home: Is It Right for You? | NextAdvisor with TIME

Buying real estate or home is considered an investment. The pandemic has changed the investment scenario and made things uncertain. Hence, investors believe you should move towards immobile assets. While first-time homeowners have enough cut out for them, people buying their second homes have a lot to think about. They need to analyze if the purchase would be an investment. When taking a home loan for the second time, you need to make sure that it is the right decision.

When a buyer cannot pay outright, they should consider taking a home loan. Amid the current turbulent situation, interest rates are at an all-time low. And taking the case of home loans, the buyer can save up to Rs 7 lakh on taxes on their second home if the loan is sanctioned with joint names.

The main merit in applying for a second home loan is the tax benefits. You do not have to pay wealth taxes if it is a let-out home. When buying a second home, you need to be prepared for the costs and maintenance it requires.

There is also a way your first home can help fund your second home. There are two ways you can go about this. First is the cash-out refinance. This is when you replace your current mortgage with a new one that allows you to access your cash by accessing your home’s equity. It helps you take out more money at a lower interest rate. This way will help you get a loan of up to 80-85% of your first home loan.

The second way to make it easier for you to buy your second home is the home equity loan. Home equity loans depend on your first home as the primary collateral to obtain money, either a credit line or a lump-sum loan. You will receive the cash at once and pay a fixed interest rate with a home equity loan.

If you buy your second home as an investment, the down payment could be higher. Lenders consider investment properties as high risk because of renters. They also worry about payments being skipped on an investment property.

Buying a second home is a big decision and makes you question multiple things. It is essential to take the right step, especially with a second home loan. You must know the options that are available to you. Check out home loan interest rates on Tata Capital’s website!

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