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How to save for your second home?

Monday, May 29, 2017
By Vijay B Pawar

Vijay B Pawar
Founder and Director, Mirador Dewellers

Real estate for long has served as an important and valuable avenue for investors. The past decade has seen an evident rise in the number of people making an investment in second homes. While for some it is an investment, there are others who buy a second home with an intent for it to serve as their respite from the hustle & bustle of their city lives. But before buying a second home, there are certain factors which one must take into account. We have listed down a few crucial ones to help you make an informed decision whenever you plan on purchasing your second home.

Figure out your WHY:
We all invest in second homes for different reasons. While some look at it as an investment, there are many who wish to have a second home so it becomes their vacation abode. One needs to understand their WHY before finally making the buying decision. As second homes come with added responsibilities and expenses, one needs to be sure if they need one and if they do then to meet which of their purposes. It is better to make informed decisions than to make big ones in haste and then have regret follow them.

Become an attractive borrower:
Banks are pretty particular when evaluating a potential borrower’s financial history and yes, history does play a decisive role in this bargain. Not only is one required to have a good CIBIL score but also maintain healthy relationships with the lenders in any previous borrowings made. The banks would never be comfortable lending to a person of ill repute. Besides this, one must also ensure on one’s own part that one is capable of shouldering the responsibility of having a loan liability to clear. Also, one must pay ones taxes on time as tax defaulters seldom get loans from reputed banks.

Build up your home cash reserve:
A single home already has many expenses to be taken care of so when one buys a second home, one has to have a cash reserve. A cash reserve is instrumental for many reasons when looking to buy a second home. For instance, there are maintenance costs, some repair work may be required at certain points of time. Then again, if one isn’t staying there then one might consider hiring a caretaker which is yet again another expense as also the fact that insurance policies come with premiums to pay.

Do not over-borrow:
It doesn’t take a financial planner to understand this simple fact that one must not over-borrow ever. Doing so will not only cause damage to ones financial history but also cause other troubles in the present with lasting repercussions in the near & distant future. One might stand the risk of losing ones home or worse, face legal action for not being able to keep up with the instalments. In order to avoid such occurrences from taking place, one must analyse in a deft fashion, ones current financial status and basis the observations take further steps.

Are you really ready? This is probably the last question in our list but no less crucial than the ones before it. Are you really ready to shoulder the added responsibilities accompanied with investing in a second home? Making a heavy investment at most times does warrant some changes to the investor’s lifestyle. So, before you take the final plunge, be sure to answer this final question.

There are many other factors too but these should help you to a large extent.

On a parting note, remember that real estate is something one should invest in, ones time learning about, for real estate pays the highest returns on investment with the least amount of risks involved.

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