Home Improvement Loan, Easy Cash for All Renovation Work
Last Updated : March 15, 2016, 10:39 a.m.
A home loan is a boon for those who don’t have sufficient funds to renovate their homes, but they want to their renovation work done. This will not only enable you to get renovation done without any issue, but at the same time it will also give you freedom to repay the loan amount in easy installments. Home improvement loan is also popular as home renovation loan that you can avail from various banks and financial firms. The loan is offered by the bank or financial firms to renovate, remodel, extension, addition in existing property, maintenance, repair, painting interior or exterior, electric work, tilling and flooring work in your present property.
You can avail the loan from bank for all the above renovation work, get the work done with the money and repay all the money in simple and easy installments without making hole in your monthly budget. Taking a loan also gives you freedom to stick to your other financial plans and get the job done. If you get your home renovated, it not only improves the beauty of the home, but also gives a new life to it. Renovation done with extension and modification increases the value of your present property.
Loan Credit Limit:
Most of the banks treat home improvement loan as secured loan and they lend you loan by keeping your property as collateral security. The banks never offer you 100% of the value of your repair work. In most of the cases, the maximum value approved by the bank for the renovation and repair work is 80%. In case, if you have a bad credit history or banks is not satisfied with your credit worthiness it will further reduce the sanctioned amount.
For working professionals the limit of the loan amount is based on their annual income or two times of the gross annual income in case of salaried professionals.
Property value: Any property, which is older than 35 years would not qualify for the home improvement loan segment. Therefore, if your property is older than 35 years, you are not eligible to apply for a home improvement loan in any national or regional bank.
Loan tenure & rate of interest: You can take a home improvement loan for upto maximum 15 years . The minimum tenure for home improvement loan is six months. However, the rate of interest varies from bank-to-bank. Some banks might offer you home loan at the rate of 10.5% or other might charge you maximum of 15% rate of interest as well. Even the processing fee for the loan also varies from bank-to-bank. Banks charge 0.5% to 0.75% as processing fee.
Pre-payment charges: There are banks which don’t charge any penalty fee for making pre-payment or pre-closure of loan. Generally, banks charge approximately 2% of the outstanding loan amount if you make the pre-payments for your loan.
Paper work and verification: If you want to minimize the paper work or shorten the verification process. Always cross-check your estimated amount, documents and other important things before applying for the loan. It is always better to apply for home improvement loan from the same bank from where you have borrowed home loan already. Always, invest the loan amount in the renovation work only because if the bank officer will come for physical verification your loan will get cleared easily.
Documents required for loan approval: Generally, banks and other financial institutions ask for a few documents for verification and documentation purpose, when you apply for home improvement loan. However, the required documents may vary from bank-to-bank. Here, we are providing the basic documents required for home loan.
In case of Salaried Personals
- Recent photographs
- Identity proof
- Age proof
- Address proof
- Bank statements of last six months
- Income tax return document
- Cheque of processing fees
In case of Self-Employed Professionals
- Recent photographs
- Identity proof
- Age proof
- Address proof
- Bank statements of last six months
- CA Certificate/Audit Balance Sheet and Profit and Loss Account of last three years
- Income tax return documents of last three years along with computation of income
- Education qualification
- Proof of Business Existence
- Cheque of process fees
In case of Self-Employed Non-Professionals
- Photograph
- Identity proof
- Age proof
- Address proof
- Bank statements of last six months
- CA Certificate/Audit Balance Sheet and Profit and Loss Account of last three years
- Income tax return documents of last three years along with computation of income
- Education qualification
- Proof of Business Existence
- Cheque of process fees
Tax benefits of home improvement loan
Home improvement loan comes with plenty of benefits. It enables you to carry out the renovation work without any financial worries. You can complete the renovation task and make the desired changes in interior and exterior of your home with steady money. Besides, this home improvement loan also offers you special tax benefits.
If you have availed a home improvement loan from any bank or financial institution you can claim tax benefits of Rs. 30,000 per annum on the interest paid by you towards the home improvement loan under section 24.
Those, who have already taken a home loan from any bank and also paying the interest towards the loan. In such condition, the overall combined limit for claiming tax benefits for both the loan goes upto Rs. 1,50,000 for a financial year.
Home improvement loan features
- Loan credit limit upto 80% of estimated cost
- Property less than 35 years older qualify for loan approval
- Interest rate 10.5% to 15%
- Process fee 0.5% to 0.75%
- Pre-payment charges 2% of the outstanding loan amount
- Tax benefits under section 24
- Maximum tax benefits of Rs. 30,000 per annum