Home renovation is great idea to remodel your home. It is not necessary that renovation is meant for maintenance purposes only. Besides, you can renovate your home for giving it a contemporary look or changing its interior. However, renovating your home can be a costly affair if you are changing your flooring, titles, color, some work on ceiling and giving a total new look to your kitchen and bathroom as well. In such situation, you need a good amount of money to conduct this home improvement task.
There are numerous banks which offer home improvement loans to borrowers. These home improvement loans come with tax benefits as well. You can use these home improvement loans for renovation work, extension of an existing old house, or even for purchase of house or a flat. Let’s take a look at the benefits and other important things related to home improvement loan.
Home improvement loans criteria: Before applying for home renovation loan, you must decide an amount in advance. How much loan you require for renovation work? There are banks which do not bother to approve a loan amount without knowing much about the purpose, if you have already a home loan running in their bank. Besides, there are banks which first take a physical verification before approving your loan.
Works included for home renovation: You can borrow a home loan for construction purposes, extension of your home, buying a new flat and apartment, making a new balcony, painting, all kinds of plumbing work or exterior elevation works are all included under home renovation.
Besides, if you are planning to borrow a loan for buying new furniture, or consumer durable, banks usually don’t approve your loans for such things. Even you can’t avail a loan for buying a new cabinet, making wooden compartments in the kitchen, or buying new wardrobe.
Eligibility criteria: All those who want to borrow a loan for undertaking extension work or renovation work can apply for home improvement loan. The sanction of the loan will be done on the basis of LTV estimate. You can avail maximum upto 80% of loan. If you have already a home loan with bank, in such scenario the total loan amount will not exceed 85% of your total property value including the estimated value of the renovation work.
Process for loan approval: If you have already a loan with the bank the approval process will be really simple and hassle free. The borrower needs to give a rough estimate about the renovation or construction work to be done and furnish it to bank. If you have already started the extension work, in such situation you need to submit an approved plan of renovation work. Once visiting the site physically and verifying the estimated cost, the bank will disburse the loan amount to the customers. The money is being released as per the rate of completion of the construction work if there is a considerable work.
But, if you are applying for a fresh loan you will have to go through all the process of a fresh application and submit income and all property documents for loan sanctioning. The processing fee charges for home improvement loan may vary from 0.5% to 0.75%.
Home improvement loan Vs Personal loan: People opt for personal loan rather than borrowing home improvement loan. The reason might be easy disbursal or due to lacks of information regarding the home improvement loan. However, the home improvement loan is far better than securing a personal loan. The interest rate of home improvement loan is lower as compared to personal loan. If you have already borrowed a home loan from any of the bank, the chances of getting a home improvement loan approved are higher. In that condition, the documentation required for personal loan is more compared to the home improvement loan.
Tax benefits on Home Improvement Loans: Home Improvement loan gives you tax benefits under Section 24 of Income Tax Act. You can avail tax benefits on the home improvement loan of upto Rs. 30,000 per annum on the interest paid. Both the owner and co owner are eligible for tax deductions on the interest paid on such loans. This loan comes under the umbrella of home loan upper limit of Rs. 1,50,000. Therefore, maximum tax benefits taken in a year are maximum up to Rs. 1,50000 lakhs per year.