Your Ultimate Guide to Home Improvement Loans
So now that your dream home is finally yours, what next? Got money to renovate your new home? Don't worry about that! You 're not on your own. Most people who buy a home by way of a home loan have little money left to make further improvements in the house.
Some people choose a personal loan to 'live' their new house. However, given that a personal loan with a short repayment period and high EMIs can have an interest rate of 12 to 25 percent, it is not the ideal outcome.
The basic criteria for eligibility for a home improvement loan are quite easy. Anyone who is employed or self - employed between the ages of 18 and 65 can apply for a home improvement loan. This loan can mostly only be used by resident Indians.
Existing borrowers can take advantage of the loan from the same lender that originally received the Home Loan. This helps them to achieve a better interest rate and the processing is much faster. Even new borrowers may apply for a loan from any bank or housing finance company for home improvement.
In general, the value of the home improvement loan is limited to 90% of the appreciated value of the property or 100% of the borrower's estimate of improvement, whichever is higher. Most lenders do not offer household loans that are more than Rs. Thirty lakhs.
The loan for home improvement is far better than a personal loan to make subsequent improvements and changes in a house. A personal loan comes at a higher interest rate, while a home improvement loan is available at 9% to 12% interest rates. The RBI guidelines prohibit banks from imposing an advance payment penalty on such improvement loans, which can be cleared off long before their tenure in the event that additional funds are available.
Like a home loan, you benefit from tax benefits for a home improvement loan. In accordance with Section 24(b) of the Income Tax Act 1961 for a self-occupied house, you can claim a deduction on the interest component if you have taken a home loan for renovation or a home improvement loan. The deduction is limited.
Types Of Home Improvement Loans:
1. The defined home improvement loans: HFC such as HDFC specifies the true nature of the purpose for which loan is used. These usually include electrical works, , carpentry, painting, plumbing upgrades, external alterations, overhead water tanks and even the wall.
2. Top-Up Loan: Doesn’t specify the purpose. The borrower here is required to submit a certificate that loan money will not used for speculative purposes.
The home improvement loan is a much better alternative to a personal loan because of the many advantages it offers. You can try a personal loan if you have finished paying off your home loan or you don't have a home but need money.
Your current home isn't just a roof over your head, it's a reflection of your style and character. It needs to be renovated from time to time, because aesthetics and ease matter as much as the location and quality of construction. So, if you have been waiting to get started with home renovations, it’s time for you to get started!
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Home Loan
Buying Home Is Easy Now: LIC To Offer Lowest Interest Rates On Home Loans!
Sun Jul 26 2020 / By: RashmiOwning a home is a dream every person wants to fulfill. And if you have been planning to buy your home, now is the time. Thanks to LIC, people can turn this dream into reality even in the times of COVID-19. The company’s housing finance arm is offering the lowest ever interest rates on home loans.
Recently, LIC Housing Finance has announced a 6.9% rate of interest on new home loans. People who have a CIBIL score of 700 or more can get home loans of up to Rs 60 lakhs at a 6.9% interest rate. In addition, for the same CIBIL score, the rate of interest is 7% onwards for loans above Rs. 50 lakh.
Talking about it, Siddhartha Mohanty, MD & CEO, LIC Housing Finance, said, “Home loan interest rates are at an all-time low for the company, thereby resulting in low EMI payment. Attractive price points and affordable EMIs will aid in addressing the demand side for buying homes.”
He also added that through this product, the company is trying to create demand in the market. He said, “There is no dearth of liquidity what is lacking is consumption demand through this product we are trying to create that.”
Griha Varishtha: Another Surprise
It is not just the low-interest rates but another special surprise that is ready to charm the people. LIC Housing Finance is launching a special home loan product for pensioners - Griha Varishtha.
The home loan product will cater to retired or serving employees of government, PSU insurers, defense, banks, and railways who are entitled to a pension under Defined Benefit Pension Scheme.
As far as the tenure of this product is concerned, it is either till the attainment of 80 years or maximum up to 30 years, whichever comes earlier.
The Bottomline
In the midst of the Covid-19 pandemic, many banks are reducing the interest rate two to three times. The State Bank of India, the largest bank in India, has also reduced the interest rate by 6.95-7.0 percent on home loans up to Rs 30 lakh. This is giving a ray of hope to those who were planning to buy a home.
If you wish to know more about the LIC home loans, click here.
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Home Loan
FAQs for Home Loans
Wed Dec 19 2018 / By: Nupur SharmaPurchasing a house is an important decision when it comes to financial decisions. On the off chance that you are wanting to apply for a Home Loan and don't realize where to begin, at that point you are in the correct place! We have addressed a couple of every questions to enable you to begin.
What amount of credit am I qualified for?
Your Home Loan qualification relies upon different elements like age, pay, debt history and so on. The qualification criteria is different from bank to bank. Be that as it may, before you settle on the credit sum, it's wise to assess your current finances and decide how much cash you can easily spend every month.
What documents do I need to get a home loan?
Keep these documents accessible before you apply for a Home Loan:
- Photo ID and age proof
- Residence proof
- Bank statement from the last six months
- Signed Application form with a photograph
- Property documents
If you are salaried then you would require a salary slip of last three months + form 16.
If you are self-employed, then you would require IT returns from last three years (having income calculation) + balance sheet and profit loss account.
How do I calculate my EMI?
Before you approach any bank for an advance, it's vital to discover the amount you will go through every month on your Home Loan EMIs to maintain a safe distance from any shocks later. In any case, EMI counts can get somewhat untidy. Try not to stress, our Home Loan EMI adding machine will enable you to ascertain your EMIs in a jiffy.
What are the factors that I must keep in mind before getting a home loan?
Before selecting one, do consider following things:
1. Interest rate:
Your rate of interest has a big effect on your EMIs and interest outflow. You must always look for low interest rates.
A fixed interest rate or a floating interesting rate is also something that you will have to decide. When interest rates are going down, floating interests work better while its better to have a fixed loan in times of rising interest rates.
2. Prepayment terms and Processing charges:
Charges like processing fee and loan pre-payment terms must be compared before settling on one.
3. Turn around time:
The approval of a home loan takes about 5 to 10 days. You must make sure to choose a reputed lender.
4. Credit score:
The approval of your home loan will depend a lot on your credit score. This credit score is a sum of all your previous borrowing & repayment. A high credit score will get you a better home loan.
Even though all the paperwork might make this work seem like a lot, following the above suggestions will surely help you get a better home loan.
Home Loan
Thinking about Home Loans? Read what RBI has to say
Thu Sep 20 2018 / By: Jigi YadavRecently, RBI has come forward and warned that it will now be costlier for the banks to lend home loans to the people on the name of cost-effective housing schemes of the government or other private organizations. This will strictly hamper the small-ticket loans of up to Rs. 2 lakh and check the increasing number of bad loans in this particular scenario.
Further, the Reserve Bank of India is very closely evaluating the loan segment of up to Rs. 2 lakh. It has been observed after the keen analysis of the data of housing loans, the NPA level for up to Rs 2 lakh loan amount is raising at an alarming rate. RBI officials have asked the banks to tighten their scrutiny procedure while lending such loan to customers. In easy terms, affordable housing is related to houses of carpet area of 600 sqft in non-metropolitan cities and 345 sqft in metropolitan cities of the country.
The new policies of the government for providing easy and inexpensive houses for all in lesser duration has driven almost all the banking institutions and financing companies to offer credits and home loans without much strict screening. One such scheme is Pradhan Mantri Awas Yojana which has attracted home loan borrowers and lenders both in offering upfront subsidies. But the only matter of big concern is increasing risk factor for the banks.
Now, RBI has announced lately that housing loan limits shall be revised in terms of priority sector lending ranging from Rs. 28 lakh to Rs. 35 lakh in metro cities where the population is 1 million or above. However, in other cities, it will be revised on a range of Rs. 20 lakhs to Rs. 25 lakhs, providing overall cost of the house should not cross Rs. 45 lakh and Rs. 30 lakh in metro and other cities respectively.