Difference Between Home Extension Loan And Home Renovation Loan

There are different types of home loans available. The most common are basic home loans for buying or constructing a house. Banks and financial institutions also offer loans for home extension and renovation. Both home extension and renovation are costly processes. Therefore, these home extension and renovation loans can be very beneficial for homeowners. Let us know more about them, followed by their differences.

What are home extension loans?

With time, people’s requirements change. Families grow, and as a result of this, people require more rooms. Other than that, people also wish to add certain features to their houses. Some people build a balcony because their previous house lacked one. Others want to transform the excess space into a lawn, pool, or garden. Adding a floor to single or double-story houses is also a common occurrence. Although these home expansion processes are less costly than buying an entire home, they still cost a lot. Therefore, these home extension loans come to use.

People wishing to extend their homes can avail of a home extension loan from a bank or financial institution.

Here are the features of home extension loans.

1. Simple eligibility criteria
2. Great interest rates
3. 90% to 100% of the extension value is given as the principal amount.
4. Long repayment tenure
5. Easy documentation

What are home renovation loans?

Every home needs renovation at some point. As houses age, brittle plasters affect the walls. Simultaneously, the woodwork starts to wear off, and the roof leaks. Therefore, these houses need repairing. Some people also love remodeling and renovating their houses to give them a different look. All such renovations and alterations require a lot of money. Thus, banks and financial institutions offer home renovation loans. These loans are easy to access and have simple eligibility criteria.

Some features of home renovation loans in India include:

1. Easy eligibility criteria
2. Low interest rates
3. Quick approval and disbursal
4. High loan-to-value ratio

What is the difference between a home extension loan and a home renovation loan?

Home extension and renovation loans are useful for people who want to improve their homes. They are both easy to obtain and offer attractive interest rates. However, both have their pros and cons. Here are some differences between the two.

1. Shifting:

While renovating, it is mandatory to move to a new temporary residence. This has its own expenses, and the process is hectic as well. But if you’re adding a room or a floor to your house, there is no need to move. In this respect, home extension loans are more convenient.

2. Ease of approval:

Although both loans get approved fairly easily, home renovation loans have a higher approval rate. This is because they are more popular and lenders are more comfortable granting them.

3. Tenure:

Home extension loans are almost similar to conventional home loans. They also have similar tenures for repayment through EMIs. They have long tenures, thus offering affordable monthly installments. Home renovation loans have comparatively shorter tenures.

4. Collateral:

Home extension loans are comparable to the usual housing loans. Therefore, lenders sometimes require collateral against which they grant extension loans. Home renovation loans have no such requirements.

5. Hassle-free process:

Home renovation loans require minimal documentation and can be disbursed within a few minutes. Home extension loans also require only basic documents. However, lenders make a few more inquiries when granting the latter.

6. Flexibility to spend:

One of the biggest advantages of home renovation loans is that they allow you to allocate the funds wherever you want. You can use the granted loan amount to do any kind of work you wish to do. You can invest it in carpentry, plumbing, masonry or anything else. As for home extension loans, you can only spend them for a particular cause.

7. Balance transfer facility:

Loan balance transfer allows you to transfer your outstanding loan balance to another lender for lower interest rates. This helps reduce your burden of debt. It also allows you to extend your repayment tenure as well. Most home extension loans enable borrowers to transfer their loan balance. It is less likely to be available for home renovation loans.