Financing the purchase of a holiday home

As the financing of a second home is risky for the banks, the share of equity can be as high as 40% of the sale price, instead of 20% in the case of a permanent residence.

Furthermore, as pension capital cannot be used to finance a second home, it is essential to provide liquidity, either through savings, a bank guarantee, or by increasing the mortgage on your main home. This last solution could have several significant advantages from the point of view of the cost of debt, but also of the taxation involved.

Coming back to the idea of raising funds on the main residence, it should be taken into account that the future buyer who has owned his main property for a long time will certainly have gradually amortized his mortgage debt. It is therefore possible that the value of the property will have increased. It will then be possible, within the terms of the grant, to raise funds on the property. One of the benefits will be to generate cash, ideally in first position, without amortisation, charged at a more attractive interest rate than on a second home.

Tax effects

The acquisition of a second home also has tax implications. As the rental value constitutes taxable income in the canton (or country) where the property is located, a tax return will have to be filed not only at home, but also in the municipality where the holiday home is located.

Once the financing is in place, you will still have to take into account the costs associated with this real estate investment, in particular the maintenance and upkeep costs, which may be higher or lower depending on the location of the property and its specific features, in particular energy.

Despite this, owning a holiday home has certain advantages, such as the possibility of having a residential home at one’s disposal in complete freedom, or even of transforming this dream into a rental investment that will reduce the financial costs of this acquisition.

How do you plan to spend your next holiday?

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