It is quite simple to get a home renovation loan nowadays. Housing finance companies offer different types of loans and the customer can choose the one he needs and requires. This type of loan is in addition to the basic home loan which is for buying a house. It has certain rules and regulations but has its utility for individuals.
Procedure
If you want to undertake repairs or renovation of residential property, a home renovation loan can be taken. Basically any type of civil work like plumbing or remodeling the kitchen or painting the flat can be done with this loan. But furniture work cannot be done, because it does not come under the category of any civil work.
The financier requires certain documents in order to sanction the loan. For this, he requires to submit a quote from a qualified civil engineer, contractor or architect. After perusal and approval of the technical staff of the financing company, the loan can be disbursed.
Most of the time the maximum limit of the home renovation loan is about 85 percent of the property cost. However, some financial organizations may sanction even 100 percent of the property cost. The loan will only be sanctioned if all the original property papers are in order. Also, if the property owner already has a home loan, he will be in a position to make the home renovation loan from the same financing company.
Interest Rates
The interest rates of the home renovation loan are generally higher than those for a home loan. However, the rates are lower than that of a Personal Loan. Both fixed rate as well as floating rate renovation loans can be availed of. There are tax benefits too on home renovation loans, but only on the interest portion. Therefore, before you finalize an alternative, you should evaluate your options well.
Mortgage Companies
There are mortgage companies in the US who have a solution that lets you purchase or refinance a home and improve it, all in one loan. Their home renovation loans are useful for borrowers who may have just found a home, but it needs a little work. Or they are current homeowners with little equity and who would like to remodel their homes. Or they are renovating their homes to increase the value of investment rental property.
Some of the basic benefits of a home renovation loan are that there are no payments during renovation and the renovation terms could be from 6 months to 2 years. Unlike a traditional home loan, your home renovation loan amount is based upon the value of your home after the improvements. So you can take the loan, make the home improvements and build the dream home that you had always wanted.
