Things You Must Know Before You Avail A Home Renovation Loan
Your home is your safe space and it needs to be in robust conditions in order to serve you with that safety. With time, our house loses its shine and it needs our attention in terms of repairs. It is extremely important to care for our home because over time, external conditions like rain or calamities as well as internal conditions like old faulty electric systems can quickly turn dangerous. Hence refurbishing should be a regular practice to maintain the quality of your property. But remodelling or repairing a house is like servicing a car – it can be expensive. Material and labour costs are increasing every day. Here, let us get to know about home renovation loans.
A home renovation loan is a loan taken up for the expenses of renovating or repairing a house. It is the best way to finance a home improvement but not a lot of people are aware of it. Use cases may include any repairs in a faulty system, such as painting the house’s interior or exterior, plumbing, upgrading the electrical system, waterproofing the ceiling, and more. It helps homeowners increase a house’s retail value as well as its aesthetic appeal.
Here are some things you should know about before you avail of a home renovation loan:
After Renovation Value
A home renovation loan amount is calculated on the basis of one key factor – the value of the home post renovations. Instead of a house’s current value, lenders or banks bank on a home’s estimated post-renovation value to calculate how much an applicant can borrow. This provides the opportunity to avail higher amounts on an improvement loan. Renovation loans are the ONLY type of loan that provides credit based on future value. Also, since real-estate values only ever go higher, home renovation loans are in fact a great investment on top of being a loan. In case you wanna sell the house someday, you will have great value for your property.
Home Renovation Loan Interest Rates
Home renovation loan interest rates vary from applicant to applicant based on their CIBIL score, amount availed and tenure of the loan based on one’s capability to repay the loan. These rates are usually lower for renovation loans as compared to traditional home loans. One can opt for a fixed rate arrangement or even a floating interest rate model. It is important to compare different banks and lenders and their respective interest rates online before deciding on the best home renovation loans for you. Depending on your needs, different banks might provide customised features.
Home Renovation Loan Eligibility
The criterion for a home renovation loan is fairly straightforward :
- The applicant needs to be within 18 – 65 years of age at the time of application.
- The applicant must be either a resident or an NRI.
- The applicant may be salaried or self employed.
- The applicant must have a permanent residence or a rented residence which they have rented out for over 12 months.
- A good credit score of at least 700 or more.
Home Renovation Loan Documents
It is important to be prepared with the necessary documents in order to process a smooth eligibility check :
- Proof of identity (Aadhaar card, passport, driving license, Voter ID, etc.,)
- Proof of residence (water/Electricity bill, Aadhaar card, passport, driving license, etc.,)
- Proof of Income (salary slips, bank statements)
- Improvement/Renovation plans (received from civil engineer/architect)
Home Renovation Loan Tenure
Home renovation loans are available for a tenure of up to 1-5 years. Repayment options are flexible too.
Home Renovation Loan Fee
There is usually a small percentage of the loan amount charged as processing fee. This percentage mostly varies from 1-3% depending on the lender. Therefore it is important to compare different loans before you come across the best home renovation loans.
With some research and planning, home renovation loans can be an important tool in improving living conditions for individuals and in turn building up to greater real-estate value for their home.