Why put off the dreams of renovating your home when you can apply for a home improvement loan? Make use of this affordable loan product and remodel your home with added luxuries and amenities.
“Your home is where you are the most relaxed and at peace.” If you want your home to provide you with complete relaxation and rejuvenation, then it’s necessary to upgrade it with time. Whether you’re adding a Jacuzzi to your bathroom or fitting a modular kitchen, home renovations can be quite expensive.
It could take years to save the cash you need to fund home renovations. This is where home renovation loans come to your rescue.
As the name suggests, a home improvement loan is a specialized loan that you borrow to fund home renovation or remodelling projects. Here’s what you need to know before you jump the gun and sign on the dotted line of your home renovation loan application.
- Get an estimation of the Remodelling Cost
The first thing that you have to do before submitting your loan application is to get an estimate of the project cost from a registered engineer or architect. Lenders make use of this quotation to assess your loan application.
Most lenders provide you with 70-90% of the total project cost. You have to fund the rest. When you submit your lender with an estimated value from a registered architect/contractor, the lender is confident of the renovation time and is more likely to approve your loan application.
- Technical Verification happens from time to time
You may think that once your lender is satisfied with the estimated quotation and your documents, he/she will disburse your entire loan amount. Well, no!
Most lenders tend to verify the extent of the remodelling project before disbursing the full amount. They send a technical verification team, who submits a report to the lender during the entire time of renovation. Depending on this report, your lender provides you with the required loan amount in parts.
- Understand what’s included and what’s not
When it comes to home renovation, you can apply for a loan for the following: extending a balcony/room, repainting the house, repairing flooring, adding in new styles of plumbing/flooring/tiling, constructing a modular kitchen, renovating your bedroom style, and so on.
Remember that your loan gets approved only when the renovation takes place within your built-up area or your compound wall. If you have a restoration planned for areas beyond your permitted limits, then your lender is most likely to reject your application.
- Keep track of whether you’re Eligible
The loan-to-value ratio for home renovation loans is up to 80% of the total project cost. You can apply for a higher ratio if you’re an existing customer or have successfully paid off prior loans with the lender. Additionally, your credit score, employment status, income levels; all play a crucial role in determining whether you’re eligible for the loan. The eligibility will determine the loan amount that gets sanctioned.
Remember that the loan amount is disbursed in parts throughout the renovation period. And during each disbursement, you’ll have to fund a part of the amount from your pockets.
- Tax-deduction and Eco-friendly Features
While you’re not eligible for tax deductions under Section 80C, you can apply for tax deduction under Section 24B. According to this, you’re eligible for tax deductions up to 30,000 INR per annum for the interest you pay for the home loan.
Additionally, adding eco-friendly features to your home like solar cells, rainwater harvesting, etc. help in increasing your loan-to-value ratio.
There’s no arguing the fact that “Home Renovations are getting expensive.” The best way to carry out a home renovation is to apply for a home improvement loan with a lender who offers you the best interest rates. This way, you need not put off your renovation dreams till you save up the money to pay out of your pocket.