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Our home is always our biggest pride. It gives us a chance to break free from the rest of the world and enjoy moments of solitude, love and companionship. However, with the passing of time, our houses often suffer from damages and therefore need to be renovated and improved in order to be presentable again. Besides, it is always advised that one should renovate their house if they haven’t done so in years so that they can avoid the occurrence of serious problems like loose ceilings, damaged plumbing and more.

There are many factors that need to be kept in mind before you plan to renovate your house. These factors include designing the interior, getting in touch with the contractor, purchasing the raw materials, etc. All such things need an investment of both time and money. No matter where you live, the cost of getting your house renovated will always exceed the budget you have set. This is when you should consider applying for a home improvement loan.

Why Should You Apply For Home Renovation Loan?

With home improvement loans, not only can you avoid getting tangled in a web on worries, but also choose to make changes to your home as per your requirement. Besides, if you have maintained a good credit score, you can avail home improvement loans quite easily. The funds received from these loans will help you get your house designed, customized and built in a way which not only suits your taste but also provides you comfort! These loans are almost similar to home loans. However, where home loans help you in buying the house of your dreams, a home improvement loan or a home renovation loan helps you in renovating your house as per your requirements.

Every few years, the need to make changes in your living space arises due to various reasons. This could be due to the family extension, degraded plumbing, fading wall paints, etc. However, before you apply for a home renovation loan, make sure to learn all about the project you hope to accomplish, have adequate equity and be financially stable. Many people apply for house renovation loans simply because they are easy to obtain, however, before you do so, it is wise to understand all the features and benefits of this type of loan in order to avoid unfortunate incidents.

Features of Home Improvement Loan

While a home loan enables you to acquire a house, home improvement loans are meant for improving the home that you already own. Features of Home Loan are

  1.  Purpose– You can use a home improvement loan for activities such as renovation, repairs, flooring, extension, painting etc. You cannot utilize Home renovation loan for repair or purchase of movable items like furniture, fixtures, furnishings etc.
  2. Interest Rates- Often times, people apply for personal loans for renovation purposes. While you may easily do so, keep in mind that the interest rates on a personal loan are comparatively higher than that on a home renovation loan. The interest rate is typically the same as the home loan interest rate. Interest rates could be adjustable (floating) over the tenure of the loan or fixed for a specified period
  3. Loan Period – The payments for the loan may be spread over a maximum term of 15 years. The tenure of the loan is also dependent on several factors like the property’s age at the time of loan maturity, customer’s profile, their age at maturity of the loan.
  4. Applying-You may apply individually or jointly for availing this loan. If your home is jointly owned, all owners of the property have to necessarily apply for the home improvement loan. However, your family members may become joint applicants for the loan even if they are not joint owners of the house.
  5. Quick Processing- This type of loan does not take a lot of time to process as compared to personal loans and home loans. You can get your loan request approved instantly if your documentation is complete and authentic. You can also receive the money within 24 hours of applying for the home renovation loan.
  6. Documentation- Another factor is that applying for home improvement loans is very easy and hassle-free as there is very less documentation required. Apart from the basic documentation for identity and income proof, property title deed, photographs, etc. there is not much else that is required. Moreover, if you have already taken a home loan from the lender, the required documents decrease even further.  Typically you would require the following documents for availing the home improvement loan:
    • Filled application form
    • Identity, income, employment and residence proof
    • Last 6 months’ bank statement
    • Photographs
    • Original title deed of your home
    • No-encumbrance certificate
    • Architect/engineer’s estimate of your improvement work
  7. Tax benefits: House renovation loans could get you a tax benefit on your interest component. For a self-occupied house, if you have taken a home loan for renovation, you can claim a deduction on the interest component up to Rs 30,000 a year. However, if the interest is paid for the renovation of a rented house, you can claim the entire interest as a deduction up to only Rs. 200,000 as per the Finance Act, 2017 and balance you can carry forward. Please keep the invoices and bills of the renovation as proof for claiming tax benefit. In case of a self-occupied house, if repairs are of capital expenditure in nature (not normal repairs) such renovation cost can be considered as ‘cost of improvement’ for that particular property. This will help bring down the taxable capital gains if the property is sold in the future.
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