Umbrella of home improvement covers and provides for all improvements that are to be done in the home premise. However, purchases of different home or kitchen appliance or a consumer durable product do not form the part of the loan.
Eligibility: To be eligible for the home improvement loan, you need to produce an estimated amount for renovation before the bank which the bank on its discretion can physically verify at times by visiting the site. Of the estimated amount, banks may sanction a maximum of 80%. In case the applicant for the home improvement loan is also a home loan borrower of the bank, bank may consider disbursing the entire estimated amount provided the amount does not exceeds 85% of the property value.
Also, you need to possess property documents for providing it as a proof to the banking entity as without it, it might be difficult to get the loan sanctioned.
Home Improvement loan comes with tax benefits
The interest amount paid in lieu of such loans is allowed for availing tax deductions to the maximum of Rs. 30,000 in a year as per Section 24 of the Indian Income Tax Act. The deduction can be claimed by even the other borrower, in case the loan account is held jointly by two individuals. Nonetheless, it needs to be remembered that the allowed deduction is part of the total interest exemption of Rs. 1,50,000 under interest paid towards home loan. The benefit thus lowers the effective cost of loan for the home improvement loan borrower.
Other Benefits of Home Improvement Loans
Other than sanctioning a higher amount to the tune of 85% of the roughly estimated value for repairs and renovation and in some cases upto 100% of the cost of repairs when the applicant already maintains a loan account with the bank and taxation benefit, home improvement loans similar to home loans are disbursed with a longer repayment period. Even if the borrower has funds to repay the loan well before time he can also do so without any prepayment penalty.
So, in case you are planning to renovate your home premises in the near term, home improvement loan can be better in comparison to other loan categories such as personal loans.