While searching a dream property for the first time, the wonderful interior designs with artistic construction blew your mind away and thus led you to buy that home on a loan. After spending a few years there and realizing that the size of the home was not at par with the size of your family, you started looking in the market to sell your possession so that you could buy another of your liking.
After all it is quite understandable that sometimes you end up purchasing a property, which was earlier looking high on promise but failed to deliver after you stay there.
But as the small house was difficult for you to accommodate, the same feeling was expressed by others when they came to look at your property. One day, one of your friends suggested you to purchase a spacious home, giving you and your family a plenty of space to chill around, on a loan. Inspired by the thought, you got serious of availing a second home loan. And at this exact moment you may find yourself pondering,” Do I qualify for a second home loan?”
Fact is that you can avail the option. But ignoring the potential perils of the move can hit you hard. So, check whether the second home loan finds a place in your purse or not. Also see whether the lender answers in affirmative to your clamour, do I qualify for a second home loan. You can know that and plenty more below.
Possible Situations That Could Emerge when going for second home loan
(A) Stringent Norms to Comply With
First and foremost thing to look at the loan terms which can be miles different from the earlier loan. The lenders can apply stringent norms to be absolutely sure of your repayment capability before disbursing you the second loan.
(B) Upfront Charges Can Cause a Hole in Your Pocket
The upfront charges can be much steeper in the case of a second home loan compared to the previous one.
(C) Expect to Receive Less
In a first home loan, you can receive 75% funding for a loan amount exceeding ₹ 75 lakhs from banks and other housing finance companies (HFCs). But in the case of a second home loan of over ₹ 75 lakhs, the extent of finance can be reduced substantially. The funding for other loan amounts can also be lower.
(D) EMI to Jump On Higher Interest Rates & Shorter Tenure
The interest rate charged by the lender can firm up when you approach it for a loan to buy a second home. Since you already have one home, the lender perceives the move as an investment purpose, thereby causing the interest rates to spiral.
Another reason that can add fuel to the surging EMIs is the increasing possibility of a shorter tenure for a second home loan. With the tenure getting shorter, the EMIs jump many notches up and could well cause a huge dent in your pocket.
Second Home Loan Eligibility Calculator
The lender is expected to scrutinize your monthly income and down payment to figure the amount that it can disburse as a second home loan. Also, your investments, if any, can be thoroughly screened by the lender.
Obviously, the first home loan EMI could tempt the lenders to decrease the amount of lending in the case of a second home loan. However, if your income is upto a level where it can deal with your existing EMI and the indicative EMI, the equation can change in your favour by lender agreeing to offer you a maximum amount of loan.
But if you are going through a terrain of several loans like personal loan, car loan and others, the loan amount will be a lot lower than you could think of.
The age is another factor that could play a vital role in deciding the lending amount for a second home. The more the age you have before hanging your boots from professional arena, the greater is the chance of a significantly higher amount of loan.
Second Home Loan Tax Benefit Calculator
When you buy a first property and stay there, the principal repayments attract a tax deduction to the tune of ₹ 1 lakh under Section 80C of the Income Tax Act. While the interest repayments go unscathed from the tax lens for an amount upto ₹ 1.5 lakhs under Section 24. In the case of a second home loan, the tax benefit is available only on interest repayments and not on both. When you have two properties, one is considered self-occupied and other one perceived as let out. However, there is no limit of tax deduction on the interest payments on a second home loan.
Income Tax Benefit on Second Home Loan Under Construction
If the second home is a under-construction property, a 20% of the overall interest repayment in the course of the pre-construction period will be considered as tax deduction. But unlike the earlier case wherein there was no limit of tax deduction on the interest paid, here the benefit applies for first five years only.
Hope you have got an answer to your question, “do I qualify for a second home loan?” Look at the pros and cons of a second home loan before taking a call on the same.