This festive Season Redo your house through a home improvement loan

With the upcoming festive season, many of us tend to think about renovating our homes, or at least mull over giving it a fresh coat of paint. Sometimes though the hurdle can be finances, or rather lack of them. Instead of running from pillar to post for alternatives, it is simpler to evaluate a home improvement loan, a loan product that is designed specifically for this purpose. So whether you want to paint your house, carry out repairs, remodel or home or even construct an additional floor (in case of a house), look no further. Within this segment, what you should look for is the lender that offers you the best deal out there. Irrespective of season, you can give your house a facelift, and banish your financial woes at the same time.

What is a home improvement loan?

As mentioned above, this product can be availed of by any individual who wishes to renovate, or improve their home as the product suggests. Typically, most lenders agree to fund up to 80 percent of the renovation cost (basis the quotation you submit to them at the time of loan application), and the tenure or duration of the loan normally does not extend beyond 15 years. The interest rates for the product are competitive, and tend to work out far cheaper than say for instance a personal loan, with the interest rate being in the range of 9.5 to 10.5 percent, while a personal loan may cost you as much as 24 percent. A loan interest calculator can guide you best as to what will likely work for you. Your property is required to be kept as collateral security for this loan. Most banks however do not give loans for property that is older than 35 years. Loan repayment can be carried out via monthly EMIs, as with other loan products.

Who can avail of this loan?

Essentially, any individual house owner, but do keep in mind that only the registered owner of the property in question can avail of this loan. Banks and housing finance companies do extend this facility to new customers as well (those who do not have an existing housing loan with them) as naturally of course to existing customers. In the case of the latter, a lender is likely to give even 100 percent of the cost of repairs subject to a cap of not more than 80 percent of the property’s market value, while with a new borrower the limit may not exceed 90 percent, depending upon the loan amount requested for.
Tax exemption information
As with some other loan products, you can claim a tax exemption on availing of a home improvement loan as well, under Section 24(b) of the Indian Income Tax Act, 1961. The interest paid on the loan is tax deductible of up to Rs. 30,000 per financial year. This amount can be claimed within the Rs. 2.0 lac limit per financial year that is applicable for housing loan interest. Furthermore, both the home owner and co-owner can avail of this exemption.

Fees and charges
Most lenders do charge a Home Loan Processing Fees for this loan, normally ranging between 0.5 percent and 1.0 percent of the loan amount applied for. As per revised Reserve Bank of India (RBI) guidelines, a lender cannot penalize a borrower with charges should they wish to pre-close the loan before completion of tenure.
Documentation requirement
In addition to the standard identity proof and KYC documentation as per RBI guidelines, a lender will ask for the following when you apply for a home improvement loan:

Income proof
Bank account statements
Property documents
Documents and bills (certified by a qualified architect as per the lender’s terms)
Latest tax-paid receipts for the property in question
Proof of having filed income tax returns
An estimate for home improvement

[Source: https://www.creditsudhaar.com/blog/2016/09/07/this-festive-season-redo-your-house-through-a-home-improvement-loan/]