Options for Home Renovation Loans

Just like your car, your house also needs your care to maintain its robustness and elegance. Every home demands periodic maintenance work like painting, restoration, remodeling and many more to keep it in a good state. Hence, it is imperative to refurbish your home at periodic intervals because with time, natural factors like rain, sun, storm and normal wear and tear can take its toll on your property.

Home refurbishing can be a costly affair due to the rising costs of materials and labor. But rather than undertaking that expense by squeezing it out of your monthly budget, the better option is to opt for loans offered specifically for home refurbishment.

Benefits of such home renovation loans:

• Purpose of loan: To cover the costs of construction and renovation work
• Tax deduction benefits in case of home loan top-up and home renovation loan
• Some banks cover the entire cost of renovation while others cover up to 80% or 90% of the cost.

Loans you can avail for home refurbishing

1. Personal loan

An unsecured loan offered for any personal requirements like an unexpected/unplanned expense, debt consolidation or home renovation  is termed as a personal loan. This unsecured loan is sanctioned primarily on the basis of the credit score of the borrower and his/her annual income. Personal loan is popular among loan takers for its quick approval, disbursement and minimal documentation requirement.  Though personal loans do not usually offer you tax benefits, a personal loan for home renovation provides you with tax ded.

2. Home loan top-up

As the name suggests, this loan is a top-up on your existing home loan. But, this loan can be availed only when you have an existing home loan and availing this loan would extend your payback period or result in higher EMIs for your current home loan. Home loan top-up is a better option owing to comparatively lower interest rate, however, you will be able to avail it if you have paid all your previous home loan EMIs on time.

3. Home improvement loan

Home improvement loans such as HDFC home improvement loan have become popular in recent times and are one of the best options available if you are looking to renovate your house. These loans have a tenure of up to 15 years and feature attractive interest rates starting from 9.55%. Additional discount of 0.05% is applicable if a woman is the primary applicant for this loan.

Table 1: Comparison of loans for home refurbishment* :

Loan Type	Interest Rate	Loan Amount	Loan Tenure	Documentation	Interest Amount To Pay for Rs. 10 Lakh Loan
Personal loan	15-25% p.a.	For salaried, the EMI does not exceed 30—40% of the take home salary. For self-employed, it depends upon the profits earned during the previous two years	1-5 years	Duly filled and signed application form Passport size photo Identity, Age, Address and Income Proof	Rs. 42,629 (for 30 months loan tenure and at 20% interest rate)
Home loan top-up	10.5-14%	Upper and lower limit varies from bank to bank	Up to 10 years	Duly filled and signed application form Passport size photo Identity, Age, Address and Income Proof Personal assets and liabilities statement	Rs. 22,244 (for 60 months loan tenure and at 12% interest rate)
Home improvement loan	9%-12.5% Floating interest rate tends to be lower as compared to fixed	Up to 90% of the cost	Up to 15 years or more	Duly filled and signed application form with passport photo Proof of identity, residence and income All original title deeds of property An estimate of the proposed renovation work from an architect or civil engineer	Rs. 16,365 (for 90 months loan tenure and at 11% interest rate)

*Figures provided in the table are indicative and liable to change from time to time based on RBI directives and banking initiatives.

Popular Loans available in the market

There are many options on offer for availing a loan for refurbishing your home. If you already have a home loan, the chances of getting a home improvement loan are much higher. On the basis of your requirement, compare the different loans available and select the one which satisfies your requirement.

1. ICICI Bank Personal Loan

Eligibility:

• Salaried- 23 to 58 years
• Self-employed- 28 to 65 years (for doctors lower age limit is 25 years)
• Also, the applicant should fulfill the minimum income requirements of the bank

Loan Amount:

The loan amount varies from Rs. 50,000/- to Rs. 15,00,000/- depending on your eligibility, income and repayment capacity.

Interest Rate

The interest rates offered by ICICI Bank on personal loans start from 11.49%.

Processing Fee:

The processing fee varies between 2% to 2.25% depending on your company and location of employment.

2. SBI Top Up Home Loan

Eligibility:

• Good repayment record previous home loan (timely EMI payments)
• Mortgage document is created in favor of the bank extending you the loan

Loan Amount:

Minimum: Rs. 3 lacs

Maximum: Rs. 5 crores.

Interest Rate

The rate of interest varies according to the loan amount and the mortgage type. For up to Rs. 50 lacs, 0.50% above Base rate (BR), currently 9.3%, effective rate 09.80% (Term Loan) and 0.75% above BR, effective rate 10.05% (Loan Overdraft).
*BR –Base Rate

Processing Fee:

0.35% of Loan amount (minimum Rs. 1500/- and maximum Rs. 10,000/-)

3. HDFC Home Improvement Loan

Eligibility:

You can apply individually or jointly with all owners of the property as co-applicants for this loan.

Loan Amount:

Loan amount is subject to the repayment capacity of the customer and market value of the property.

Interest Rate:

HDFC offers home improvement loans at home loan interest rates.

Processing Fee:

Up to 0.50% of the loan amount or Rs.2,000, whichever is higher, plus taxes.