We all dream of purchasing a home in our work-life years. Furthermore, once you are the owner of a home, some people tend to contemplate the idea of owning a second home as well. But this decision can turn out to be a troublesome experience if there is a lack of financial planning and poor location selection. When purchasing a new property, it is always advisable to do a compatibility check with prospective home loan lenders by contacting the top lenders like SBI through SBI Home Loan Customer Care.
To further ensure that your second home purchase proves to be financially rewarding, here are some smart tips to consider before purchasing your next property:
Assess your financial position
The first step towards buying a second home should be an assessment of your current financial position. After consulting with HDFC Home Loan Customer care, remember that going ahead to buy a house demands a huge chunk of money and long term commitment which is only possible if your finances allow it. In case you are planning to fund the second house through a home loan, make sure you can service the loan without increasing your fixed obligation to income ratio (FOIR) beyond 50% since lenders prefer lending to borrowers with a FOIR of up to 50%. However, if your FOIR exceeds 50%, then you may either opt for a longer tenure or make a higher down payment against your home loan to reduce your EMI and hence the FOIR as well.
Some lenders may also consider your spouse's income as well while computing your net monthly income. Contact SBI Home Loan Customer care to know the applicable eligibility criterion for the home loan and the associated property. Additionally, various lenders have been offering the EMI calculator and loan eligibility tool on their portals to ease customer’s experience in evaluating their eligibility and loan’s affordability. For further clarity regarding product features and/or expected EMI outgo, feel free to contact top home loan lenders’ helplines such as HDFC Home Loan Customer Care.
The purpose of purchase should anchor the location's selection
The purpose of buying a second home can either be an investment, rental income or vacation. Selection of home's location and property largely depends on the purpose for which the house/property is being bought. If it's being bought to provide a source of income through rent, then the location should have a good enough rental demand and offer a decent infrastructure as well, both social and physical. In case the house is being bought for the vocational purpose, then a location situated closer to nature and away from the city should be ideal. And a location offering value and high scope of capital appreciation, especially in the initial stages of development, would suit those buying a house for investment purposes such as funding for a child's marriage or retirement. Therefore, before finalizing your location and property, consider contacting SBI Home Loan Customer care once you are clear regarding the purpose behind this decision and then decide upon the appropriate property.
Check your credit score before applying for a home loan:
Lenders or banks generally prefer a credit score of 750 & above while lending to borrowers. Therefore, in case you are planning to source funds for your second house property through a home loan, ensure you check your credit score and report before applying for the loan. Reviewing your credit report periodically would help in spotting errors that could harm your credit score, if any, and getting those rectified timely from the bureau or lender. You can also check about the credit score cut off and another eligibility criterion by enquiring at HDFC Home Loan Customer Care. Moreover, a higher credit score could boost your chances of loan approval, along with favourable service terms and lower interest rates. You can conveniently fetch your credit report and score, along with monthly updates, through online financial marketplaces.
Don’t compromise with essential financial goals:
Whether you finance your second home yourself or through a home loan, make sure you don't end up compromising with your life's essential goals, such as child's marriage or retirement. Do not disturb your emergency fund to pay a higher down payment since the primary motive of this fund is to assist during financial exigencies such as job loss or severe illness, due to which your regular income stops. Ideally, your emergency fund should be minimum 6 times your monthly living expenses. While choosing your EMI amount for the home loan, make sure you consider your existing EMIs, monthly contributions towards the investments or emergency fund so that you wouldn't need to sacrifice these to fund your second home. Compromising on such essential financial goals due to an aggressive repayment strategy or higher down payment would thus force you to borrow at a much higher cost in the later stages of life. If you are stuck or confused regarding the financial planning part and/or EMI and tenure to choose, the availability of convenient and hassle-free SBI Home Loan Customer care would assist you in taking the right home loan decisions.
Analyze the ROI prospects
While finalizing your second home, make sure you also analyze the return on investment (ROI) prospects of the property if the purpose behind your purchase is an investment. ROI basically measures the investment's performance by measuring the return on investment through the net profit relative to the cost of investment. A higher ROI implies the net returns from the investment are more than its cost. Factors such as infrastructure, the location of the home property, availability of public transportation, rental demand, overhead costs such as maintenance or parking cost etc., greatly affect the ROI prospects of a property. Therefore, while finalizing the second home, enquire at HDFC Home Loan Customer care to know that these factors look favourable for the chosen property, thereby improving the chances of higher ROI.
Understand the tax implications:
The principal, as well as interest paid on home loans, can be claimed for tax deduction up to Rs.1.5 lakhs and Rs.2 lakhs, respectively, for a self-occupied property. However, if the property is not acquired or constructed within 5 years from the end of the financial year in which the home loan was taken, this interest benefit would fall to just Rs.30,000. Also, the principal deduction’s claim is valid only when the property is held for a minimum of 5 years from the end of the year in which possession has been obtained. Also, in case the borrower own two or more houses, only one would be considered self-occupied and others as let-out properties or deemed rented out.
If you are a working couple, then a joint home would entitle both of you to avail the tax benefits separately as well, therefore reducing the total tax outflow in the family. Moreover, having the wife as the first loan holder would help the couple fetch a marginally lower interest rate. However, to ensure you both can claim the available tax deductions, make sure your spouse is not only the co-borrower/applicant but also the co-owner of the joint loan. Whenever you face any confusion regarding available tax benefits on a second home, you can quickly contact the SBI Home Loan Customer care to get a fair and clear idea before going ahead with any decision.
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