Owning a home is a dream for many and only a few are privileged enough to own a second one. Buying a second home is more of a financial decision than an emotional one. There are pros and cons around a second home.
In our article today, we discuss the pros and cons of Second home buying to make a weighed discussion.
Pros of buying a Second Home
- Extra Income – Generating additional income is the intention in most cases of second home buying through renting. In most cases, rent is used to pay EMIs of the Home Loan. If the home buying is self-financed, an extra income wouldn’t hurt.
- Better Investment – Second home is a good investment provided a stable financial ability. With rising inflation, the property value appreciates. It is safe to make an investment in real estate. Compared to additional savings and investment instruments like Fixed Deposits, Savings Accounts, Recurring Deposits, Mutual funds, or gold. Considerably the rate of returns is high provided the asset is tangible. If you have savings that aren’t yielding many returns, buying a second home is the better choice. It is important to buy a second home in a location that sees price appreciation.
- Gathering Location – Having a second home in the city outskirts may fit for family gatherings. It can be used to host gatherings on a regular basis with friends and families.
- Working far from Home – If one is working away from home in a different city, region, or country, and there is a possibility of future prospects at the work city, people intend to buy a home over there for setting. Or if the work area is close by a few hundred km and couldn’t afford to travel every day to work, it is better to opt to buy a second home for a weekday stay. One needs to call a place of their own in the work city during the workweek. In such a situation, renting a home is a preferred option. If one has substantial income, buying a second home is a better choice to gain ownership while compensating rent as EMI.
- Switch easily – if one has two homes in different cities, it would be easy to relocate for different purposes for various purposes like jobs or sometimes need a change of place.
Additional Reading – Tasks to do after clearing your First Home Loan
Cons of Buying a Second Home
- Difficult to rent/sell – Sometimes, there are issues with the locality and the demand for rented houses in the neighborhood. This will make it difficult to rent out the second home. Without sufficient demand, it’ll also be difficult to offload the property by selling. In certain cases, when there are many listings up for sale in the market, it’ll become extremely difficult to sell the property without amenities and demand.
- Issues from legal heirs – Sometimes, the second home might turn ugly during the dividing of inheritance to legal heirs. After division, the tax and maintenance expense falls on those who inherit and might not be liable for the person. Also, in the case when there are multiple heirs, inheriting a second home or vacation property can lead to arguments about its shared use and costs.
- Increased tax burden – Home Loan on home buying has multiple tax benefits. However, the same won’t extend to the second home. Though tax exemptions are available for interest paid to the banks, As the repayment continues, the tax burden increases, and the benefits continue to reduce.
- Maintenance difficulty – If the second home is far away from the primary residence, it is definitely difficult to maintain. Especially, in terms of security, independent houses are more prone to security concerns than apartments. One has to often visit the location just for the sake of it consuming the whole time. And it’s definitely not one who dreams of having second home ownership.
- Rental management issues – Property management is not an easy task where many factors weigh in. The homeowner must address the issues on the property such as repairs, leakages, etc. It is also important to keep track of the payments to manage one’s commitments. Even if one appoints a property manager, the salary will drain the revenue. In case maintenance is not done by the owner, property damage is imminent and will deem costly in the future.
One needs to weigh both pros and cons before making a decision to buy Second Home. If you are looking for financing your Home purchase, Money Mango offers Home Loans at competitive interest rates from multiple lenders. Contact us today for all your Home Loans in Bangalore.