Basics of Home Improvement Loan

Home Improvement

Homeowners who are planning for a remodeling or improvement projects depend mostly upon home improvement loans for finance. While several such financing schemes exist, the one that will rightly suit will depend on several factors like the total duration of the project, the planned changes, the money in hand and the equity available.

Home improvement and repairs can get substantially expensive at times. However, most often they need to be undertaken to protect the infrastructure from permanent damages. Home improvement loans are a common way to finance the renovation. Almost all Banks provide home improvement loans along with home loans.

Purpose of Home Improvement Loan

Home improvement loans may be described as financial schemes and assistance package to homeowners for improving / furnishing their household at low interest rates. It can be availed for constructing, renovating or acquiring a flat or a house.

• Can be available along with housing loans


• Can be availed separately in case the main housing loan is requested from other banks

Eligibility

• Owners of flats and houses who are either salaried / have their own business / self employed or NRI professionals


• For salaried homeowners, the minimum take home amount should be around 25% of the gross salary. However, the percentage varies with banks. For non-salaried people and other self employed professionals, the minimum annual income should be a minimum of 50,000 with income tax returns as evidences.


• Loan margin and quantum


• If a home improvement loan is requested along with the home loan, the total amount should be greater than a year’s gross salary in most cases.


• The loan quantum too will be decided according to the take home salary amount.


• However, if home improvement loan is requested separately, the norm is between 15% and 20% margin.


• Security


• Mortgage of flats / houses


• Hypothecation of all assets created by the loan


• Personal guarantee / suitable co-obligation

Documents and other formalities

• Salary certificates


• IT returns / ITAO


• Cost estimates / Performa Invoices


• Other identity details

Processing charges


This too varies highly between banks and is subject to the amount of the total loan.

It is important to understand the basics of every home improvement loan structure. The associated closing costs make it an investment that requires thorough considerations. Failing to pay home improvement loans can put you in a risk of foreclosures. You would never want to put your family’s safety and comfort at stake.

Most people apply for home improvement loans when looking to sell their property. A renewed home attracts more prices and this can be viewed as an investment that will eventually enhance the value of the property and bring profits.

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by Sridhar Kulkarni via Shriram Properties Bangalore