Home Improvement Loan (Home Renovation Loan)

Home Improvement Loan Eligibility Criteria

Each bank will have its own eligibility criteria for the loans they offer but the gist of these are:

• You can apply for a home renovation loan as an individual or jointly with the other owners of the house being the co-applicants.
• Salaried and self-employed individuals can also apply for these loans
• The minimum age requirement for this loan is that you should be at least 21 years of age. The maximum age is limited to your retirement age. This means that the loan tenure cannot exceed your retirement age. For salaried individuals the age limit is 65 years for most banks.
• Even companies can apply for this loan provided they have been in operation for a predefined minimum period.
• Companies applying for this loan may also be required to be in a position where they have been making profits in the last few years.
• All the owners of the property will have to be co-applicants for the loan.

Documentation Required for Home Renovation Loan

The documents that will be required for you to be able to avail the home improvement loan will depend on the finance house that you approach. Some of the common documents needed are:

• The first document will be the application form for the loan with photographs.
• Both salaried and self-employed people may be required to submit salary statements.
• You may also need to provide bank statements covering the last 6 months.
• You may be asked to provide Form 16s and IT returns or ITAO documents.
• All the original deeds of the property will also be required by some banks. You may be required to submit just the copies but originals might be required for the purpose of verification.
• You must also submit a quotation from your architect on the estimate on how much the renovation is going to cost.
• An address proof will also be required. This can be a drivers license, passports, ration cards, etc.
• In some cases an identity proof may also be asked for which can be drivers licenses, Aadhar cards, passports, phone bills etc.
• Pan cards, drivers licenses, Aadhar cards and passports can also be submitted as proof of age, if required.
• Some banks may require that you take out an insurance policy on the house to cover the loan amount and name them the sole beneficiaries for it. In such cases you will have to provide the policy documents too.

Home Improvement Loan Interest Rates

When it comes to interest rates, most of the banks and finance houses offer you two choices. The first is a fixed rate of interest and the other is floating interest rate.

• Fixed interest rateThe fixed interest rate is when the rate of interest is fixed before the loan is approved. This interest rate will remain fixed for the duration of the loan. The general band for this interest is between 9% per annum and 12.5% per annum. The exact rate, of course, will depend on the bank you take the loan from. The interest rate may also change depending on your employment situation. Salaried individuals tend to get offered lower interest rates as compared to self-employed applicants.
• Floating interest ratesThe floating interest rate is an interest rate that is linked to the prime lending of the bank. This prime lending rate is affected by the repo rate (the rate at which the banks borrow money from the central bank) and can fluctuate. The advantage of the floating interest rate is that it tends to be a bit lower than the fixed interest rates. It does not generally exceed the fixed interest rates and even if it does, it generally does so for a short period.

Features and Benefits of Home Improvement Loans

Home loans that are meant to help refurbish your house offer a lot of features and benefits that are meant to make the loan easy to take and manage. Some of these are:

• Many banks offer choices between fixed and floating interest rates that are meant to give you the choice of an interest rate that suits you. This does not mean that you get to choose the amount of interest. It means that you have a choice in the way the interest is calculated.
• In some cases banks may offer a combination of the two interest rates where in the first few years will be a fixed interest rate and the remaining tenure will have a floating interest rate.
• For most of the banks, you can apply for the home renovation loan online thus negating the need for you to journey to the bank itself.
• As far as the loan amounts are concerned, some banks will cover the entire cost of the renovations. There are some banks that wont cover the entire cost but even then they may cover up to 90% of the cost.
• In certain cases the bank may issue the entire loan amount in one lump sum or in instalments as and when it is needed.
• Some banks also offer free credit cards with these loans to sweeten the deal.
• Many of the banks ask for minimum documentation which means less paper work for you.
• There is no need for you to have a prior relationship with the bank in order to avail this loan however, being an existing customer can have advantages. Some banks offer up to 80% of the required amount to new customers but 100% of the required amount to existing customers.