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While buying a dream home can be physically and financially exhausting, maintaining it can be equally strenuous. To make your home look attractive, it is essential to remodel, renovate, and improve it with time. To refurbish and modernize as per your taste, you require funds. If you do not have adequate funds, you can easily apply for a home renovation loan by getting a home loan top-up.
A home’s condition is adversely impacted by normal wear and tear with time and environmental factors like rain, storm, floods, etc. Hence, home improvement becomes imperative in due course of time, especially before festivals.
Home renovation requires adequate funds to bear the cost of materials and labor. With rising inflation, home improvement ideas have become expensive. To make your home look new, you can plan for a home improvement/renovation loan during major festivals as several banks have a multitude of offers during the time. Whether there are pending repairs, a need for new furniture, painting, or even remodeling the kitchen, you should try to get it completed with adequate funds. It becomes very encouraging if you get it done before the festival.
What are Home Renovation Loans?
Home renovation or home improvement loans are secured loans against your equity. It is a mortgage loan taken for several reasons, such as renovation, remodeling, or repair and construction of your property. It is not taken for major construction, but for simple repairs and modifications such as bathroom fitting, furniture work, modernization, remodeling, etc.
You can think of applying for a home improvement loan if –
You own an equity
You are willing to mortgage your property.
You require large funds.
You wish to avail of tax benefits under Section 80C of Income Tax.
Home Loan Top-up
If you already have an existing housing loan, you can easily apply for a top-up loan. If you are making regular monthly payments on your running loan, you may be eligible for a top-up loan available at the same interest rate. A borrower can become eligible for a top-up as he/she has already paid a significant amount of the home loan to the bank.
Process of applying for a Home Renovation Loan
Applying for a house renovation loan is much easier than applying for a fresh house loan.
Follow the steps to apply –
Checking the eligibility – You can check your eligibility online using the bank’s calculator with loan amount details, age, income, current obligations, and property details. With eligibility, you get to know about the tenure and loan amount. If you are eligible, you can quickly submit an online application form.
Loan application – Fill an online application furnished with the complete details of the borrower. The bank officials will approach within 24 hours regarding the loan process.
Offer for loan and submission of documents – After checking your eligibility, the bank offers you a loan with a specific amount and tenure. You can negotiate the terms with the bank representatives. The loan approval is finalized after the scrutiny of bank statements, property documents, physical verification of the property, etc.
Approval and disbursal – As soon as the bank is satisfied with the documentation and other formalities, the loan gets approved and disbursed.
Eligibility and Documents Required for a Home Improvement Loan
The processing is similar to a housing loan. You can either apply for a loan jointly and independently. Any individual who owns a home can apply for the loan, whether salaried, professional, or self-employed. The minimum age for applying is 24 years or above, ensuring that the repayment is made before 60 years of age. You can apply for the loan along with co-applicants; they don’t need to be co-owners.
The documents required for the loan are-
Proof of date of birth that includes PAN card, birth certificate, 10th certificate, driving license, or passport.
Proof of identity can be a passport, voter card, driving license, or PAN card.
Proof of address can be a copy of the electricity bill, water bill, telephone bill, Aadhaar card, passport, or property tax receipt.
If you are a salaried individual, along with the above documents, you need to submit Form 16, the last three months’ salary slips, a copy of IT returns, and a certified letter from the employer. In case you are self-employed, submit an ITR of the last two years, computation of income, and profit and loss statements attested by a certified chartered accountant.
Apart from eligibility documents, a borrower must submit property papers such as an original deed, proof of no obligations on the property, and also a budget plan for the proposed work that is approved by an architect or a civil engineer.
Factors to be considered before applying for Home Renovation Loan
The requirement of funds – The decision to mortgage your property must be well-thought-out. If your fund requirement is not too high, you can try to arrange by liquidating some short term financial investments like a fixed deposit. List down the purchases, cost of labor, and material to define the budget. Once you’ve narrowed down the budget, you can easily plan on taking a home improvement loan.
Interest rates – A home improvement can be a good option for you if your credit score is good. Currently, with the home loan interest rates being all-time low, you can leverage the benefits of low-cost funds.
Eligibility – If your profile is suitable as per the eligibilities mentioned above, you can apply for the loan. You can check for the amount that can be sanctioned as per your credit score, income, and age.
Fees – Generally, banks charge nominal processing fees. You can compare the processing fees charged by different banks so that it does not increase your repayment cost.
Repayment methods – As per your monthly expenditure, you can decide the best repayment mode and tenure of the loan. You should always try to repay the loan as soon as possible. If you have some funds in the future, you also have an option to make a pre-payment.