When is it the right time to buy a second home ?

Second home

The second home is an alternate home purchased by the buyer for investment purposes. The second home purchase helps to benefit the owner as the property prices go on increasing continuously & also, rental yield is beneficial to be availed by the owner. The second home can be a weekend holiday home or a residential property within the city for an investment purpose. Buying a holiday home in the outskirts may not yield rental for the buyer. Holiday homes are like weekend gateways for people to rest on weekends in scenic places. The properties purchased within the city have got good appreciation as the demand is always there for the properties, especially in metros. Properties located within a metro have got good demand for rentals as many people cannot afford to buy their own houses and thus the demand for rental homes is high. The second home’s value gets appreciated in 5-10 years, in which the buyer can expect almost double the returns on the property depending on the market conditions. The second home can also be used as a mortgage in case of financial emergency to avail loan against property.

Loans are easily available for the purchase of second homes. Those can be purchased on loans as banks are always keen to extend the loans to the borrowers who have stable income & proper employment proof, or else the source of income proof through entrepreneurship. Home loans can be availed from any leading private banks, public sector banks, NBFC’s, or cooperative credit societies. The market for real estate had been slow due to pandemics, which is steadily improving due to the government’s tax rebate and a reduction in stamp duty by most governments. The real estate sector is seeing a great comeback post COVID, with property transactions increasing. The buyer can avail of loans at attractive interest rates from the bank at 6-9% per annum. The banks also charge processing fees on the loans being processed. Against a good credit score, there is no reason that banks may reject the loans of the applicant.

Things to consider while buying a second home

· Budget for buying the property

The budget is an important factor for the purchase of the property. The higher the budget, the better are the locations where properties are available. The borrower should analyze the budget and accordingly should identify the localities where the budget fits. The budget for buying the property should be analyzed based on the funds available in savings, loan eligibility for the borrower & the expected rise in salary hikes in the employment, which can decide the affordability of the buyer.

· Home location

The buyer should decide whether the individual wants to buy the property for a pure investment purpose within the city or buy a holiday home in the outskirts. The appreciation for the holiday homes is very less as compared to the properties purchased within the city. Buying a house within the city region can help get rental income which is not the case in holiday homes.

· Return on investments

The anticipated returns on investments should be analyzed based on the development being taking place in the region. When massive industrial & infrastructural development is taking place, the returns on investments are very high. While some isolated or odd locations where the development is not so rapid, the rate increase in the locality may not be very high.

· Evaluate long term goals

The long-term goal should be analyzed based on the investment done. The property investment can yield better returns compared to the money kept in fixed deposits. Thus the long-term goal should be decided based on the anticipated rate of returns which can be gained. The duration of returns should also be decided, like the tenure for the repayment of loans, the interest charged on the property, and, accordingly, the returns gained after selling the property.

· Funding your second home

The second can be purchased by availing of home loans at attractive interest rates from the bank or an NBFC. The property payment can also be made through past savings or the withdrawal of funds from the fixed deposits, stocks, or mutual funds.

Buying a second home is very much a benefit from the investment point of view. The purchase of a holiday home can provide leisure and a good destination for relaxation, while the availing loans from the bank sometimes may not be possible for the holiday homes. In comparison, the property purchased within the city can yield rental income, higher returns on investments, and also loan availability from the bank.