Home Renovation Loan Interest Rates
Lenders usually offer home improvement loans at floating interest rates. The interest rate for a loan applicant availing a home renovation loan depends on several factors including their monthly income, credit score, loan amount, employer profile and business profile. Home renovation loan interest rates are usually the same or slightly higher than the interest rates offered 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 updated as of 19th November 2024
Home Renovation Loan Processing Fees & Prepayment Charges
Most banks, NBFCs and HFCs charge processing fees from both new and existing borrowers for availing home improvement loans. Processing fees for home renovation loans typically range between 0.25% and 2.00% of the total loan amount. RBI has put in place strict guidelines to prevent lenders from charging prepayment fees on floating rate loans. However, lenders have the discretion to charge prepayment fees on fixed rate loans or waive them off altogether.
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Documents Required for Home Renovation Loan
The documentation process for a home renovation loan is similar to documentation for regular home loans. Following are some of the main documents required in order to apply for a home renovation loan:
- Duly filled application form
- Age proof
- Income proof
- Proof of employment/business
- Address proof
- Property documents
- Estimated repair cost quotation
Note: This list is non-exhaustive. Additional documents may be required based on the applicant’s profile and the provider’s requirement.
Home Improvement Loan Eligibility Criteria
The eligibility criteria to apply for the home improvement loan are as follow.
- Resident Indians are eligible to apply for a home improvement loan. Some lenders also offer home renovation loan to NRIs
- Age: Lenders typically offer home renovation loans to new loan applicants or existing borrowers (in case of balance transfers) who are 18 years of age or older. However, they usually want their home renovation loans to be repaid by the time the borrower reaches age 70.
- Both salaried and self-employed individuals/business owners can apply for a home improvement loan
- Borrowers can also enhance their eligibility for home loan by adding co-borrower(s), selecting a longer loan tenure or providing an additional source of income
- Credit Score: Loan applicants with a credit score of 750 or higher have a higher chance of getting a home improvement loan. Many lenders also offer home improvement loans at lower interest rates to applicants with higher credit scores.
Individual lenders may also consider other factors such as applicant’s income, liabilities, properties owned, work experience (for salaried individuals) and business continuity (for business owners) etc. while ascertaining the eligibility of a home improvement loan applicant.
Features of Home Renovation Loan
Below-mentioned are some of the features and benefits of the home renovation loan.
Loan-to-Value Ratio
When it comes to home renovation loans, the LTV ratio is the total proportion of the property value that can be financed. Lenders usually offer up to 100% of the renovation estimate, subject to the condition that the LTV ratio offered for a home renovation loan should not exceed the home loan LTV ratio limit prescribed by the RBI. The details of the loan amount and the respective LTV ratio are given below:
| Loan Amount | LTV Ratio |
| Up to Rs. 30 lakhs | Up to 100% of the renovation estimate subject to the LTV ratio not exceeding 90% |
| Rs. 30.01 lakhs to Rs. 75 lakhs | Up to 100% of the renovation estimate subject to the LTV ratio not exceeding 80% |
| Above Rs. 75 lakhs | Up to 100% of the renovation estimate subject to the LTV ratio not exceeding 75% |
Banks, NBFCs and HFCs undertake a credit risk assessment to ascertain the final LTV ratio for a loan applicant. The factors considered during the credit risk assessment process include the borrower’s credit profile and repayment capacity, market value of the property, etc.
Loan Tenure
Lenders usually provide home renovation loans for tenures of up to 20 years with some lenders offering loan tenures extending up to 30 years. Most banks/HFCs offering the home renovation/improvement facility under their home loan product provide repayment tenures of up to 30 years.
- Lenders take into account the repayment capacity of an applicant while deciding their loan tenure.
- They usually require loan applicants to restrict their monthly EMI contribution, including that of their proposed loan, to be within 50-60% of their net monthly income.
- Loan applicants availing renovation loans can use home loan EMI calculator to ascertain the both the loan tenures and EMIs for their home renovation loans depending upon their repayment capacity.
Tax Benefits of Home Renovation Loan
Home renovation loan borrowers can claim interest repaid of up to Rs 30,000 per financial year as tax deductions under Section 24(b).
Availability of Balance Transfer Facility
Existing home renovation loan borrowers can avail the home loan balance transfer option, wherein they can transfer their outstanding loan amount to another lender at a lower interest rate. This aims to reduce their overall interest cost. Note that the new lender will carry out a detailed credit risk assessment of the applicant before approving his balance transfer request.
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