Your dream house is hardly going to remain that way for eternity. We change and grow and so do our family, our needs and at times even the space we live in. Sometimes people outgrow the home, need a change of colour or style, or maybe even need repairs, renovation offers new looks to a living place. But with such improvements, there comes a hefty price to pay. If you also want to renovate your home then opting for a home loan for renovation can be your perfect choice.
What is a Home Renovation Loan?
A K is a kind of secured loan, where you rent your present home to a lender and borrow money based on its market value. This means that your house is used as collateral to ensure that you will repay the loan on time. Just like taking a home loan, the borrower avails a certain sum of money and then pays back the money along with interest all through the agreed tenure on the loan.
Home Renovation Loans Offer Several Advantages
Access to larger sums: Unlike credit cards, personal loans, or even debt consolidation, home loan for renovation offer you a significantly higher loan amount, which is perfect for more extensive redecoration work.
Favourable interest rates: Since your home secures the loan, the interest rates usually range lower than that of an unsecured loan.
Different Loan Options For Renovation
There are a few key options to consider when choosing a home renovation loan:
Traditional Home Renovation Loan: This is the most popular type which is provided by all the major banks and housing finance companies. You usually qualify for the loan based on your credit score, income and the amount of equity you have in your home.
Top-up Loan on Existing Home Loan: If you are already a home loan borrower, you might opt for a boost loan which is also referred to as a top-up loan. This means that the amount is added to your current loan for renovation.
Loan Against Property (LAP) without Income Proof: It is a type of secured loan in which you may not necessarily need to provide any proof of income. Nevertheless, to obtain this loan you might need to use your property or any investment as collateral. However, the given and requested LAP interest rates are higher as compared to the general home renovation loans offered by the financial institutions.
Although a Loan against property without income proof might seem attractive, there are too many drawbacks. Consequently, high interest rates mean more loan costs. Besides, it is believed that the lenders might have stricter eligibility criteria concerning the property.
Factors To Consider To Qualify For Home Loan for Renovation
It is necessary to know the eligibility requirements of loan applicants. There are some general factors that lenders consider when checking your application.
Credit Score: A good credit history is proof of an applicant’s ability and willingness to repay the money to the lender responsibly. A good credit score might help to get you low interest rates on the borrowed amount.
Equity in Your Home: The more equity you have in the property the better the loan package you are likely to qualify for. The amount of financing that can be borrowed is expected to be somewhat limited by lenders’ minimum loan-to-valuation ratio, or LTV, standards.
Conclusion
Always take the time to research and select the ideal home loan for renovation. When you opt for this loan it helps you to renovate your home completely and stay afloat financially. Remember, effective renovation helps in improving the functionality of the home and adds to its beauty.