How to Finance Your Home Renovation?
Last Updated : March 15, 2016, 10:43 a.m.
Ideas to renovate a home is really exciting, but expensive as well. If you just want to change a few things in your living room or master bedroom, it may require less amount of money. But, if your plan is to give total new look to your home, then you need some good budget for home renovation. Home renovation excites all of us and once you complete the task you feel good and fresh. It gives you feeling of a new home.
After deciding the new look, finalising the wall color and furniture, the most important thing you need to calculate is setting a budget. You must calculate the money required to complete renovation work. How are you going to arrange the funds? Are you going to use your savings? Will you take a personal loan? Or you will look for some other ways to finance your renovation work. Here are some easy ways to organise finance for renovation work.
Use your savings: For your home renovation work, you can check your saving. If you have enough funds to support the renovation work without effecting your other financial goals, then your savings are the best option to use for home renovation. You can use your Fixed Deposits or other savings for the purpose.
Take personal loan: There are many financial firms and banks which offer personal loan. You can borrow person loan as per your requirements. The banks offer you personal loan on the basis of your monthly salary. This is an unsecured loan, therefore, no need to tell bank the purpose of borrowing loan. You can use this loan as per your requirements. However, the tenure and interest rate of loan may vary from bank to bank. Some banks charge fine for pre-paying the loan and there are banks which don't charge anything for pre-paying the loan. Before, borrowing the loan read all terms and condition in detail.
Loan against property: For home renovation work you can take loan against your property. Most of the financial firms and banks offer this loan. Banks offer upto 80% of value as amount for loan against property. The rate of interest of loan against property is lower as compared to taking a personal loan. You can select the tenure for minimum six months and above as per your requirements. This loan also offers you tax benefits, which a personal loan does not.
Property extension loan: Banks and financial firms offer you property extension loan. You can use this loan for renovation and property extension. The rate of interest of this loan may vary from bank to bank. You can opt for a tenure as per your requirements. This loan also comes with tax benefits.
Use credit card: You can also use your credit card for your home renovation work. You can buy material with your credit card. You can also withdraw money as your card's upper limit allows. You can divide your total expenditure into easy EMIs and repay it within a year or lesser time as per your financial plans. Using your credit card allows you freedom to repay the borrowed amount in advance as well without paying any penalties on it. But, this doesn't offer you any tax benefits.
Home improvement loan: Home improvement loan is also a good option to arrange funds for home renovation. However, many people borrow personal loan for this purpose, might be because of ignorance or time-consuming process. As you can avail a personal loan within a week or so, but disbursal of home improvement loan might take longer time. If you already have a home loan, the chances of getting a home improvement loan is higher. You can also claim tax benefits after borrowing home improvement loan. However, the rate of interest of different banks may vary from 10.25% to 11.00%. So look for options, which are wallet friendly and offer maximum benefits.
Top-up loan: This loan can be borrowed from banks on your existing home loan. The amount of top-up loan is not higher, but it might be enough for your small renovation work. The usual tenure of this loan is 10 years. The minimum interest rate for top-up loan is 11.25%. The loan amount may vary from bank to bank based upon your eligibility.
Mortgage loan: Banks lend you loan by mortgaging your gold, jewellery, and investments. This is another option to secure money for your renovation work. However, the rate of interest of this mortgage loan is comparatively higher. For your home loan and top-up loan you need to pay minimum 9.50% of interest and 11.25%, respectively. But, for this loan you will pay higher rate of interest.