Budgeting for a Second Homeowner Personal Loan

By: Kirthy

It is much easier to realise your dream of buying a second house today. Your existing lender will lend money for a second home, if you’ve established a good repayment track record. However, those toying with the idea of purchasing a second home must understand the huge debt they will incur. If the cost of purchasing a house is around 50,000£, owning two houses can mean a debt of more than a 1LAKH£. Before you take the giant leap, it is advisable to spend some time and take stock of your finances. Proper planning and budgeting will help you take prudent decision.

Interest rates on home loans have touched double digits. Experts predict a slump at the end of the high interest rate regime. Those who got giant hikes in their pay packets can consider a second home loan. Their net disposable income after paying existing debts and other monthly expenses must be in excess of the presumed EMIs for the second home loan.

It sounds good to own two houses. Do you earn enough to make repayments for two loans? Borrowers have immediate monthly commitments and future expenses. List down future expenses like children’s education and marriage and how you plan to raise extra funds for them. Draw a list of your assets, savings and investments. Can you fall back on your savings for your future expenses? Some expenses like health or accidents, simply crop up from unexpected quarters. Before you apply for a second loan, see if you have assets/savings to meet future expenses and contingencies. This way you can avoid the possibility of defaulting on the loan.

Two home loans translate to a huge financial commitment. It may take the borrower around 20-25 years to clear the debt. Since home loan tenures are long, living a frugal lifestyle on tight finances can become stressful. Those who are seriously contemplating a second home loan should keep their debt obligations in mind before indulging in wasteful spending.

You can explore services of a financial planner, if your entire pay packet ges towards repaying debt. Borrowers must be able to save at least a small amount of money every month. This can be used as a contingency fund. It will come to your rescue in the event of financial crisis.

Analyse your different sources of income and assets. Explore if you can mobilise these funds for purchasing the house and borrow only the remaining amount from the bank. This will ease your EMI burden. Manage your assets and obligations well.

Article Source: http://www.dxarticle.com

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