Here are some key points to consider when looking for home renovation loans.
Often when your house gets old, you may need funds to renovate and repair it. A home renovation loan can be helpful to get you sufficient funds for this purpose. Home renovation loans are primarily offered by various banks and financial institutions to help homeowners fund the renovation or improvement of their existing homes.
These loans are specifically designed to cover the costs of repairing, renovating, or enhancing the functionality of your house. The amount of loan can vary depending on your eligibility and the property value. Here are some key points to consider when looking for home renovation loans.
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Home Improvement Loans
These loans are specifically meant for renovation and repair work. They usually have a shorter tenure and lower loan amounts compared to home loans. If you already have an existing home loan, you can opt for a top-up loan. This allows you to borrow an additional amount over and above your existing home loan for renovation purposes.
Adhil Shetty, CEO, Bankbazaar.com, says, “Before applying for a home renovation loan, carefully assess your renovation needs and budget to ensure you borrow an amount that you can comfortably repay. Also, you must go through the terms and conditions of the loan agreement carefully.”
Eligibility Criteria
It can vary among lenders but typically include factors such as income, credit score, and property value. You may need to provide proof of the renovation project, such as estimates from contractors or architects.
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Loan Amount
It is recommended to take the loan amount that is enough to complete the renovation of your house. You may be offered higher amount considering your income and property, but always avail the funds that you can repay without any stress. The loan amount you can borrow depends on the lender and your eligibility. Typically, lenders offer up to a certain percentage of the property’s current market value.
Interest Rates
Interest rates for home renovation loans can be fixed or floating and can vary between lenders. Compare rates from different lenders to find the best deal.
Repayment Tenure
The repayment tenure for home renovation loans ranges from a few months to several years. Choose a tenure that suits your repayment capacity and does not put too much financial stress on you.
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Documentation
It is important to keep your documents ready to ensure hassle-free loan processing. Get a clarity from the lender on documents you may need before and after the renovation to be submitted. Be prepared to provide documentation such as proof of identity, residence, income, and property ownership. Lenders may also require documents related to the renovation project.
Loan Disbursement
After verification of your personal and income, the bank would disburse you the loan. In some cases, the lender disburses the loan amount directly to the contractor or vendor involved in the renovation project, rather than giving the funds directly to the borrower.
Tax Benefits
You may be eligible for tax benefits under Section 24(b) of the Income Tax Act on home renovation loans. However, the tax benefits are subject to certain conditions. You must read the tax instructions carefully to avail benefits.
If you are planning to take a home improvement loan, it is advisable to compare rates and terms from different lenders. Ensure that you repay the entire loan within the tenure.
