Home Improvement Loan. Do you know this?

Home Improvement Loan – an easy way to renovate your home

The growing popularity of home loan is very well known, the fact that banks are now laced with customer-friendly policies has made it very easy for people to buy their dream home. Home improvement loan is one such much needed loan to fulfil the rest of the needs of the home.  Well, home buying comes with a lot of other responsibilities like maintaining the home, taking care of the internal and external fittings etc. all these steps are necessary to keep your home safe and new.  Similar to any product that you use, your home also needs an upgradation, improvement, and maintenance. However, managing the funds for the same in one go is not easy especially for those who are already paying the monthly EMIs for the house; car and other policies. For such people, banks now have the provision of Home Improvement Loan.

What is a Home Improvement Loan?

As the name suggest, Home Improvement Loans are availed to construct a new floor in the house or get a repair done or in case you want to renovate your house . Home Improvement Loans works similar to home loans. It can be taken for a period of 10-15 years or more (depends on your pocket and banks from where you are availing the loan) and pay back the amount in the form of EMIs. Apart from the major construction or other work done in the house, these loans are also beneficial for things like electrical wiring, bathroom fittings, furniture etc.

Inclusions and Exclusions of Home Improvement Loan

This loan serves the purpose of house renovation but banks have defined certain work for which your home improvement loan will be sanctioned while for certain work you cannot get home improvement loan, here is the list of inclusions and exclusions:

Inclusions : Home improvement loan can be taken for construction and renovation work like building another floor ,making a new balcony, flooring work , plumbing, electrical work, painting, bathroom fittings or exterior elevations.

Exclusions: Home improvement loan is not sanctioned by the bank if you are buying consumer durable goods, like buying a new kitchen cabinet or a new wardrobe.

Eligibility Criteria:

  • Any homeowner who is willing to renovate or construct in his/her house is eligible to apply for home improvement loan.
  • You can apply for home improvement loan jointly with the co-owner.
  • The minimum age to apply for home improvement loan is 21 years and the maximum limit is your retirement age i.e. 65 years.
  • Even companies can apply for this loan but the company should be making profits in the last few years.

Those who have already availed home loan from bank, if you apply for home improvement loan from the same bank, the bank considers the total loan amount applied (this is inclusive of new application). The total sanctioned amount is not more than 85% (outstanding amiunt as well as new sanctioned amount together).

Processing of Home Improvement Loan:

  • In order to apply for home improvement loan, the borrower has to make a rough estimate of the renovation work and has to submit it with the bank.
  • In the case of extension work, the approval plan also needs to be submitted in the bank.
  • Once the estimate is submitted in the bank, the banks carry out the physical verification which includes taking the measurement, pictures of the house to correlate with amount submitted for a loan.
  • Once the verification process is done and bank approves your application, the loan is disbursed.

What if you don’t have a home loan?

Home improvement loan is not restricted to those who have availed home loan, for those who want to start a fresh, you don’t have to worry; you have to follow a similar procedure of a home loan to avail and approval of the home improvement loan.

Submit all the income and property documents to get your loan sanctioned. The processing fee of home improvement loan ranges between .5% -.75%.

Is there any other option?

Personal Loan – Well, you can opt for a personal loan as well. People in a hurry to avoid a lot of procedures and paperwork avoid getting the process of home improvement loan and plan to avail the personal loan. Although it is a bit easier but at the same time it can be a bit heavy on your pocket primarily because personal loan comes with a higher interest rate. On the other hand, home improvement loan’s interest rates are cheaper and it is considered to be more secure as compared to the personal loan.

Top –up loan – You can also opt for a top-up loan. If you already have a home loan you can take a top-up loan on this. But an important point to note here is that this loan can be taken only after a certain number of years of your home loan. Most of the banks mention the number of years between  3 to 6. The interest rate is base rate plus some percentage. If a bank has offered the home loan at an interest rate of 10 % and you apply for a top-up loan, then your top-up loan interest amount will be 11.25%. The top-up loan is cheaper than a personal loan.

Top-up loans are sanctioned for 70% of the total property value but this may vary as per the market value and the borrower’s ability to repay the loan. A processing fee of top-up loan is between .5 %-.75% of the loan amount.

We hope this would have enlightened you with the right option if you are looking for renovating your house.  For the same and any other home loan related queries and needs, you can log on to our portal www.loanyantra.com and we will assist you with the best option to make your home buying an easy one.


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