A little help from your lender can make your home renovation much easier on the pocket.

 

Repairing or renovating your house is no easy task. It en tails careful planning and the execution process can be gruelling. Then there is the constant struggle to ensure that you don't overshoot the budget. You can always avail of a home improvement loan to ease the burden, but you need to understand the bearing s of such loans before applying for one.

Banks and housing finance institutions extend home improvement loans to customers looking to make substantial changes or repairs to the structure of their homes. This includes tiling, flooring, internal and external plaster, roof repairs and painting. While the loan is offered to both existing home loan customers and new borrowers, the quantum is higher for the former.

In this case (existing borrower carrying out repairs on the mortgaged property), the loan amount can be up to 100% of the cost, subject to the total exposure, in cluding all other loans on that property not exceeding 80% of the market value of the property. New customers can expect 80-90% of their repair costs to be funded by such loans.

If you have an existing home loan, the process is quicker, as the lender already has your documents.In that case, your existing property acts as collateral. The loan is usually disbursed in tranches, depending on the progress of the renovation work.

However, the loan doesn't cover furnishing or woodwork. Movable furniture cannot be included in the improvement funding. Further, lenders only sanction loans for reasonable expenses. For instance, for a house worth `30 lakh, a flooring estimate of `20 lakh will not be considered," she adds.

Once you quote an estimate, the bank will send across a valuation expert to confirm it, and to certify that the loan amount is being used for the cited purpose. The processing fee ranges from 0.5% to 0.75% of the loan amount.

While you might be tempted to opt for a personal loan or others, given the long processing time involved in the issuance of a home improvement loan, keep in mind that the latter offers a number of ancillary benefits. It bears a lower interest rate than personal loans, and has a longer tenure longer at 15 years, ensuring a comfortable repayment schedule.

As an added advantage, home improvement loans also yield tax benefits.