Homeowners like to make additions to their homes now and then to improve their functionality. Home renovation has many benefits, from enhancing your quality of life to boosting the value of your property.
However, home renovation comes at a cost, and you may not always have enough cash to cover the expenses. In such cases, a home improvement loan can come to your rescue.
What is a Home Improvement Loan?
Financial institutions provide a home improvement or renovation loan to renovate or remodel your home. It covers all aspects of renovation, such as essential repairs, painting, structural changes, upgradation, or expansion.
Most lenders offer home improvement loan within the broad category of home loans they offer. The financial backing provided by this loan helps you keep your abode safe and comfortable for your family.
Features of Home Improvement Loans
Easy Eligibility and Quick Disbursement
Home renovation loans are easy to avail that they only require a few documents. Your loan can be disbursed within a few days if you have all the documents ready.
Your income documents will determine your eligibility amount. You can increase the eligibility by adding your spouse or an immediate family member as your co-applicant.
Available for Multiple Purpose
Home improvement loans are available for all purposes, whether you need funds to renovate or repair your homes. You can even use it to add furniture, fixtures, and gadgets to your home.
Lower Interest Rates
A personal loan taken for home renovation comes at a higher interest rate. On the other hand, home renovation loans are usually available at the same rate as your home loan. Hence, you can renovate your home at a much cheaper cost.
The home loan interest rates today range from 6.75% to 10% across financial institutions and can even go higher.
You can also avail of tax benefits on the interest component of your home improvement loan. Section 24(b) of the income tax act provides a deduction of Rs 30,000 per annum for the interest paid on loan. It helps reduce your taxable income and overall tax liability.
Eligibility Criteria for Home Improvement Loan
While the eligibility may vary from bank to bank, here are some common criteria for all lenders:
- The loan is available to both resident and non-resident individuals; persons of Indian Origin (PIO) and individuals holding Oversee Citizenship (OCI) can also apply for the loan
- The minimum eligibility age is 21; the maximum age is restricted to 70
- You can apply for the loan individually or add your immediate family members as co-applicant
- Both salaried individuals and self-employed professionals can apply for the loan
- The tenure of the loan can extend to 15 years
Documents Required for Home Improvement Loans
The documents required for home improvement loans are similar to the ones needed for home loans. Having all of them ready will help in the quick loan disbursement.
Proof of Identity and Residence
- Aadhaar Card
- Voters ID Card
- Driving License
Proof of Income
- Past three month’s salary slip
- Last six month’s bank statement
- Latest Form 16 and tax returns
- All original title deeds of the property
- A certificate of no encumbrances on the property
- Architect’s/Engineers’ estimated cost of improvement or renovation
- Status of your ongoing loans
- Bank statement showing repayment of your ongoing loans
- Passport size photograph of all co-applicants
- A cheque for processing fee favoring your lender
Selecting the Lender for Your Home Renovation Loan
If you already have an ongoing home loan, it may be a good idea to opt for the same lender for a home improvement loan. The lender would already be familiar with you and your documents, and the processing would be much faster.
You may also get larger funds by choosing the same lender. Banks usually grant 100% of the renovation estimate to existing borrowers. On the other hand, a new customer may be granted less than 100% percent of the estimate.
The same property will be the collateral if you opt for a home renovation loan with your existing lender.
If you feel that your home requires a renovation, get it done today with the help of a home renovation loan. With the availability of a hassle-free, quick loan that also saves your tax, nothing should stop you from improving the aesthetic and utility of your humble abode.