Basics of Home Improvement Loans

Home Improvement Loans

Home improvement loans are the newest offering of public and private sector banks in India, and are being issued in order to facilitate and expedite the improvement of the house. Since homes need regular maintenance, right from restoration of tiles, remodeling of rooms, replacement of fixtures and painting the house, all such major overhauls might need more money than homeowners have in their kitty. Such loans help improve the internal and external facilities of homes for a particular rate of interest, helping homeowners and their families improve their living spaces. Summarized below are the basics of these loans –

Coverage

House improvement loans cover a host of facilities of the comprehensive renovation of owned residential property including electrical and plumbing fixtures, flooring and tiling work, roofing and water-proofing, internal and external painting, woodwork and false ceiling, internal and external repairs, fitting the windows with grills, terrace waterproofing, compound wall paving and even upgrading bore wells (in case of independent homes). A few banks also provide a loan for buying furniture.

Eligibility

Banks in India usually do not give out home improvement loans for a property that is more than 35 years old. Additionally, the final amount that is finally approved by the bank depends on the total value of the property, the repayment capacity of the individual and the amount quoted by the architect for the improvement.

Interest Rates and Tenure

The interest rate on such loans is about 4–5% lesser than that of personal loans; so, the interest typically ranges from 10–14%. The loan can be taken for up to a period of 15 years and can usually be repaid off in 2–5 years if it is a smaller amount.

Process

Most banks in India fund about 75–80% of the amount of renovation, while the homeowner will need to fund the balance. The homeowner will need to furnish his/her bank account statement for the last six months as well as the bills and documents provided by the architect, apart from a Know Your Customer (KYC) form that is also mandatory. Banks usually provide the loan amount directly to the architect or the contractor, although the option of it being given to the borrower is also available if the borrower furnishes the necessary bills and receipts. Additionally, certain banks might also ask homeowners to furnish a No-Objection certificate from the Municipal Corporation and their housing society in case they are planning to remodel the house.

In case homeowners decide to avail the improvement loan from the same bank from where they availed a home loan, then they will have to deal with lesser paperwork. Although most banks and lenders do not come for a property check and are lenient regarding how the loan amount is being put to use, there are some of them who insist on a physical verification and inspection of the property before they sanction the loan. The processing fee for such loan usually lies between 0.5% and 0.75%.

Additionally, loan prepayment for home improvement loans usually attracts a prepayment charge of 2% of the outstanding amount.

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by Balaji R via Visakhapatnam, Vizag | Apartments, Flats, Homes, Houses, Plots, Property, Properties, Real Estate, Villas | for Sale | Shriram Panorama Hills