Ever happened that you wanted to escape from your fast city life for a while and slow it down a bit?
Does your heart yearn for the woods or beaches, and you long to escape from the rush of life?
It happens to most of us, which is natural, especially for those with stressful work life. Everyone needs a break to recharge and rejuvenate themselves. And one of the best ways to do this is to go to your vacation home.
Vacation homes are comfortable and provide a one-stop destination for relaxation and enjoyment. Spending stress-free days in vacation homes allow people to reflect, ponder, and bring clarity to their lives.
Buying a vacation house might seem to be a good decision; however, one must take note of the following five things before they buy a vacation home:
1. Know the entire cost:
A vacation home isn’t like any ready-to-move-in flats. Most people prefer buying a vacation house in the woods, hills or near beaches where they can connect with nature. When planning to buy a vacation home, keeping your emotions in check, and avoiding impulsive decisions is essential.
Before buying a vacation home, it is crucial to prepare one’s budget, including all the finances. It would be best to consider all the costs; otherwise, it could become a financial nightmare.
Some crucial financial aspects include the following:
- Down payment: How much down payment are you ready to make?
- Financing: Beyond down payment, the rest of the purchase cost will be financed by the bank or any other financial institution. It is essential to plan your monthly budget to calculate the amount of EMI you can pay for your vacation home.
- Insurance: Insurance is a must to ensure the financial security of your second home.
- Maintenance: Since you will be away most of the time, maintenance costs for your vacation home will be higher than those for your primary residence.
A vacation home, while a beautiful respite, comes with extra costs. Buy only if you are ready to invest in the same.
2. Know the Rental Prospects:
People generally occupy their vacation home only for a certain number of days in a year. Therefore, knowing the rental prospects is essential when not occupying a vacation home. One can choose to rent their vacation home for parties, gatherings, events, etc. This will help generate a handsome return and can work as a high passive income.
Most people search for places like farmhouses or vacation homes to spend time with their families, friends etc. If you have purchased your vacation home at a suitable place, it won’t be difficult to lend it out for the remaining year while you are busy with your life.
3. Caretaking in Your Absence:
After all, it’s a vacation home! You won’t be there round the year, and it is most likely your second home or even the third. In your absence, it is important to take care of your vacation home, especially if it is furnished. To ensure your house stays clean, tidy, and safe from burglary and any uncertain events, you may want to hire a caretaker or watchman.
Hiring a caretaker is inexpensive, but if appropriate care isn’t taken, it will cost you money and ultimately make you regret your decision. As stated in the first point above, you need to account for the maintenance costs while analysing the financial aspects of buying a vacation house.
4. Know your Location:
Location is one of the most important aspects to consider while buying a vacation home. It starts with – what is the best escape for you? Whether you feel rejuvenated in woods, hills, beaches, or any other remote location. This will help you select the best place to buy a vacation home. Once you are clear with this, you can decide on the other aspects.
However, buying a vacation house too far from one’s residence or occupation will only make it difficult to visit there. Also, one must buy a vacation home within one’s country and not in any foreign land. Things will only get difficult if you go to a foreign place to buy your vacation home.
Secondly, it is important to know the location thoroughly before investing. The process involves learning about the neighbourhood, the weather, and nearby amenities. Since you would be spending most of your vacations there, it is important to ensure that all your requirements and expectations from your vacation home are fulfilled.
5. Plan for Taxes:
It is important to plan one’s taxes before purchasing a vacation home. This includes income tax as well as property taxes etc. Vacation home buyers must take care of taxes to avoid paying hefty penalties.
As per the income tax law, a vacation home can be considered to be let-out property and liable to tax. However, if a vacation home is your second home, then you can claim second home loan tax benefits.
It can also provide you mortgage interest tax deductions and a deduction for principal repayments under the income tax law. Therefore, apart from being an investment and leisure, your vacation home can also be a great tax-saving tool.
In a Nutshell:
Most people dream of buying a vacation house, and why not? A vacation home can be a great escape from your crazy schedule. Building a vacation home can be a bit expensive; most people buy a vacation home through a bank financing route.
It relieves them from huge cash outflow and provides the benefit of second home loan tax benefits. Also, a second home is not considered a deemed let-out property under the income tax law, relieving the taxpayers from paying additional tax.
The second home tax deduction will also reduce the overall tax burden while benefiting from investment and leisure. So, what are you waiting for? Start planning and buy your vacation home now!
Excited about your vacation home, aren’t you? However, buying a vacation home can involve significant funds. But don’t worry! You do not need to burden your wallet when TATA Capital can take care of your financing needs. Even if you are running short of funds, you can still fulfil your dream of owning your own exotic vacation home at the place of your choice with TATA Capital’s affordable home financing. The interest rates start at just 7.75% per annum. Fulfil your dream now!