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Home Renovation Loan or Improvement Loan

A home renovation loan is a smart way to finance renovations, repairs, or upgrades that can enhance both the comfort and value of your property. Therefore, it is also termed a home improvement loan. It is one of the key offerings from major banks and NBFCs across the country, which encourages people to improve the condition of their existing homes. Whether you are modernizing your kitchen, fixing structural issues, or adding extra space, a house renovation loan can make these projects more manageable.

Home Extension Loan

A home extension loan enables homeowners to finance the expansion of their living spaces, such as adding new rooms or bathrooms. With flexible repayment options and competitive interest rates, it makes renovations financially manageable. Many of these loans do not require collateral, making them accessible to more borrowers. Overall, it’s an effective solution for enhancing your home and improving your quality of life.

Interest Rate on Home Renovation or Extension Loan

The home renovation loan interest rate can vary based on factors such as the lender, your credit score, and the loan amount. Borrowers should compare rates from different lenders to secure the best deal that fits their financial situation.

The list below shows the updated home renovation loan rates of top banks and housing finance companies in India:

Bank/ NBFC Interest Rate
Bank of Baroda 8.40% p.a. onwards
PNB Housing Finance 8.50% p.a. onwards
SBI 8.50% p.a. onwards
LIC HFL 8.50% p.a. onwards
L&T Finance Ltd. 8.65% p.a. onwards
Kotak Mahindra Bank 8.75% p.a. onwards
HDFC Bank 8.70% p.a. onwards
Axis Bank 8.75% p.a. onwards
ICICI Bank 8.75% p.a. onwards
Federal Bank 8.80% p.a. onwards

Home Renovation Loan Schemes and Offers

Home renovation schemes offer homeowners diverse financing solutions for their renovation needs. Many of these options feature attractive interest rates, adaptable repayment plans, and limited-time promotions such as lower processing fees or cashback incentives. Listed below are the key things to consider when choosing a home extension loan scheme:

  1. Interest Rate: Compare the interest rates from different lenders to ensure you secure a competitive rate that minimizes your overall borrowing costs.

  2. Repayment Tenure: Look for flexible repayment terms that align with your financial situation, allowing you to choose a duration that fits your budget and cash flow.

  3. Promotional Offer: Keep an eye out for special promotions, such as waived fees or cashback offers, which can provide additional savings on your loan.

  4. Fees and Charges: Understand any additional costs associated with the loan, including processing fees, valuation charges, and prepayment penalties, to accurately assess the total loan cost.

  5. Eligibility Criteria: Review the eligibility requirements set by lenders, such as income levels, credit scores, and property ownership details, to ensure you meet the necessary conditions for approval.

Eligibility Criteria for Home Renovation or Extension Loan

Lending banks and NBFCs set home renovation loan eligibility to assess the risk of lending and ensure borrowers have the financial capacity to repay the loan. These criteria help protect the lender from defaults and ensure that loans are granted to individuals with a stable financial background and reliable repayment ability.

The table below shows the general home extension loan eligibility criteria set by a majority of lenders:

Age Nationality CIBIL Score Employment Status Income
18 to 70 years An Indian citizen, a Non-Resident Indian (NRI) 750 or more Salaried, Self-Employed Must have a stable income

Documents required for Home Renovation or Extension Loan

Lending banks and NBFCs request specific documents to verify your identity, financial stability, and ownership of the property. These documents help assess your creditworthiness and ensure that the loan is used for legitimate purposes, reducing the risk for the lender while providing you with the appropriate loan terms.

Here is the home renovation loan documents required list for a quick understanding:

  1. Identity Proof: Aadhaar Card, Valid Driving License, PAN Card, Voter ID Card, etc.
  2. Address Proof: Voter ID Card, Copy of Electricity Bill, Telephone Bill, Passport, etc.
  3. Age Proof: Passport, PAN Card, 10th Class CBSE Certificate, etc.
  4. Income Proof for Salaried: Recent ITR, Form 16, Salary Slips, Bank Account Statements, etc.
  5. Income Proof for Self-Employed: Recent ITR, Profit and Loss Account Statements and Balance Sheet of the Firm, Bank Account Statements, Business License Details, etc.
  6. Property Proof: Original Title Deeds, No Objection Certificate, Property Tax Receipts, Deel of Sale, Approved Plan, Encumbrance Certificate, etc.
  7. Other Documents: Processing Fee Cheque in favour of the lender, Application Form filled and affixed with recent passport-size photograph, Own Contribution Proof, Copy of valid resident visa stamped on the Passport (NRIs), Bank Statements of any ongoing repayments for the last 6 months

Features and Benefits of Home Renovation or Extension Loan

A home improvement loan offers a convenient way to fund renovations, allowing you to enhance your living space without depleting your savings. Listed below are the main features and benefits of renovating your home with the help of a home extension loan:

  1. Affordable Interest Rates: Home renovation loans generally come with lower interest rates compared to personal loans, making them more cost-effective for upgrading your home.
  2. No Requirement of Security as Collateral: Many home improvement loans are unsecured, meaning you don’t have to pledge your property or other assets as collateral, reducing your risk.
  3. Easy Balance Transfer Facility: If you find a lender offering a lower interest rate or better terms, you can easily transfer the outstanding balance of your loan, saving on interest and repayment costs.
  4. Flexible Repayment Tenures: These loans offer flexible repayment terms, allowing you to choose tenures that best fit your financial situation and monthly budget.
  5. Tax Benefits: Borrowers are eligible for Rs. 30,000 tax benefits per annum under Section 24 of the Income Tax Act for a home improvement loan.

Home Renovation vs Home Extension Loan

Home renovation loans are designed for upgrading or repairing existing spaces, such as kitchens and bathrooms, while home extension loans focus on expanding the property's footprint by adding new rooms. Renovation loans typically cover interior improvements, whereas extension loans finance structural changes to the home. Both options offer flexible repayment terms and competitive interest rates. Ultimately, the choice between a home renovation vs home extension loan depends on your specific needs and goals for your living space.

FAQ

Yes, you can take a loan for home renovation. Many banks and financial institutions offer home renovation loans to cover expenses such as repairs, painting, new fixtures, or upgrades. Here are detailed answers to your queries.

Several lenders offer up to 100% of the renovation or repair estimate subject to the condition that the LTV ratio for such a loan should be less than the home loan LTV ratio prescribed by the RBI.

A top-up loan is an additional loan taken on your existing home loan and can be used for any purpose, including renovation. A renovation loan, however, is specifically meant for home repairs or improvements, with funds typically tied to renovation-related expenses.

Yes, a home renovation loan can be tax-deductible. Under Section 24(b) of the Income Tax Act, the interest paid on a home renovation loan qualifies for a deduction of up to ₹30,000 per year.

A home renovation or improvement loan typically covers:
  • Painting and interior decoration
  • Structural repairs and improvements like roof repairs, electrical works, and plumbing
  • Flooring works like tiles and wooden flooring, etc.
  • Modular kitchen installations

Generally, lenders don’t ask for any security or collateral from borrowers who want a home improvement loan. However, it may vary from lender to lender, so always check for their requirements before applying for such a housing loan scheme.