Home Extension Loan

Home Extension Loan is offered by banks, non-banking financial companies (NBFCs) and housing finance companies (HFCs) to consumers looking to extend or add more space to their existing residential home property. Lenders offer home extension loans to both existing home loan borrowers and new customers. Most lenders provide this facility either through their traditional home loan product or as an independent offering within the broader category of home loans.

Features of Home Extension Loan

Interest Rates

Lenders usually provide home extension loans at floating interest rates. The interest rate for loan applicants availing a home extension loan depends on factors like their credit score, monthly income, occupation profile, employer’s profile and loan amount. Home Extension Loan interest rates are usually the same as interest rates charged for regular home loans.

Name of Lender	Up to Rs. 30 Lakh	Above Rs. 30 Lakh to Rs. 75 Lakh	Above Rs. 75 Lakh
SBI	8.50%-9.85% p.a.	8.50%-9.85% p.a.	8.50%-9.85% p.a.	Check Eligibility
HDFC Bank Limited	8.75% p.a. onwards	8.75% p.a. onwards	8.75% p.a. onwards	Check Eligibility
LIC Housing Finance	8.50% - 11.25% p.a.	8.50% - 10.55% p.a.	8.50% - 10.75% p.a.	Check Eligibility
ICICI Bank	8.75% p.a. onwards	8.75% p.a. onwards	8.75% p.a. onwards	Check Eligibility
Kotak Mahindra Bank	8.75% p.a. onwards	8.75% p.a. onwards	8.75% p.a. onwards	Check Eligibility
PNB Housing Finance	8.50% - 14.50% p.a.	8.50% - 14.50% p.a.	8.50%-11.45% p.a.	Check Eligibility
Punjab National Bank	8.45% - 10.25% p.a.	8.40% - 10.15% p.a.	8.40% - 10.15% p.a.	Check Eligibility
Bank of Baroda	8.40% - 10.65% p.a.	8.40% - 10.65% p.a.	8.40% - 10.90% p.a.	Check Eligibility
IDFC First Bank	8.85% p.a. onwards	8.85% p.a. onwards	8.85% p.a. onwards	Check Eligibility
L&T Finance Limited	8.65% p.a. onwards	8.65% p.a. onwards	8.65% p.a. onwards	Check Eligibility
Tata Capital Housing Finance	8.75% p.a. onwards	8.75% p.a. onwards	8.75% p.a. onwards	Check Eligibility
Federal Bank	8.80% p.a. onwards	8.80% p.a. onwards	8.80% p.a. onwards	Check Eligibility
Axis Bank	8.75%-13.30% p.a.	8.75%-13.30% p.a.	8.75%-9.65% p.a.	Check Eligibility
Godrej Housing Finance	8.55% p.a. onwards	8.55% p.a. onwards	8.55% p.a. onwards	Check Eligibility

Note: Interest rates as on 19th Nov 2024

Loan-to-Value Ratio

The LTV Ratio of home extension loans is the total proportion of a property’s value that a lender can finance through the loan. The LTV ratio for home extension loans should not exceed the regulatory caps on Home Loan LTV ratios decided by the RBI. The breakup of loan amounts for a Home Extension Loan and their corresponding LTV ratios are as follows:

Loan Amount	LTV Ratio
Up to Rs 30 lakhs	Up to 90% of the estimated construction cost
Above Rs 30 lakhs to Rs 75 lakhs	Up to 80% of the estimated construction cost
Above Rs 75 lakhs	Up to 75% of the estimated construction cost

Lenders carry out a credit risk assessment to determine the final LTV ratio for a loan applicant availing a home extension loan. Some of the major factors considered for the credit risk assessment process include the loan applicant’s credit profile, repayment capacity, market value of the property, etc.

Loan Tenure

Banks, NBFCs and HFCs usually offer home extension loans to applicants for tenures extending up to 30 years. Lenders take into account a loan applicant’s repayment capacity while finalising their loan tenure. They usually require loan applicants to limit their monthly EMI contribution, including the EMI of their proposed loan, to be within 50-60% of an applicant’s net monthly income. Home extension loan applicants can utilise the home loan EMI calculator to ascertain the loan tenures and EMIs for their home extension loans according to their repayment capacity.

Availability of Balance Transfer Facility

Existing borrowers have the option of the home loan balance transfer facility where in they can move their outstanding home extension loan to another lender at lower interest rates. Balance transfer facility allows an existing borrower to bring down the overall interest cost. The new lender will undertake an exhaustive credit risk assessment of an applicant before authorizing their balance transfer request.

Processing Fees and Prepayment Charges

Most lenders levy processing fees both from new and existing borrowers availing a home extension loan. The processing fees for a home extension loan usually extends up to 3% of total loan amount. RBI has formulated strict guidelines that prohibit lenders from charging a prepayment fee on floating rate loans. However, when it comes to fixed rate loans, lenders have the option to charge or fully waive off the prepayment fee.

Eligibility Criteria for Availing Home Extension Loan

• Resident Indians can apply for a home extension loan. Some banks and NBFCs/HFCs also offer home extension loan to NRIs
• Age: Lenders generally provide Home Extension Loans to new loan applicants or existing borrowers (under the balance transfer facility) aged 18 years and above. Lenders also usually require their borrowers to repay their home extension loans by the time they are 70 years old.
• Both salaried and self-employed individuals/business owners can apply for a home extension loan
• Existing borrowers can also improve their home loan eligibility by adding one or more co-borrowers, selecting a higher loan tenure or furnish an additional source of income
• Credit Score: Lenders are more likely to provide a home extension loan to applicants with credit scores of 750 and above. A higher credit score also makes loan applicants eligible for availing a home extension loan at lower interest rates.

Individual lenders also consider factors like an applicant’s income, their assets and liabilities, work experience (for salaried), business continuity (for business owners), etc. while ascertaining their eligibility for a home extension loan.

Documents Required for Home Extension Loan

The documentation process for a home extension loan is very similar to the documens required for regular home loans. Some of the major documents required in order to apply for a home extension loan:

• Identity proof
• Address proof
• Age proof
• Income proof
• Proof of employment/business
• Property / home extension related documents
• Estimated cost quotation for home extension
• Duly filled application form

Note: This list is not exhaustive. Lenders may ask for additional documents based on the loan applicant’s profile and their requirements.