Homes are properties which need constant care. Once you buy the house, you want to make it look good and keep it in pristine condition. However, home maintenance, renovations and improvements involve a lot of money. The cost of labour, raw materials as well as finished products is high and sometimes you may not have the funds to manage the upkeep. With home improvement financing and loans you can invest in the upkeep of your home by repaying the amount you take as loan in easy EMIs over a tenures ranging up to 30 years.
Features of a home improvement loan
- Quick and speedy approval and disbursal
- Gives flexibility to the borrower
- Prepayment options available at a very low cost
- Minimal documentation is required- KYC Documents, identity proof, salary slips of last two months (for salaried) and ITR forms (salaried)
- Loan tenure up to 5 years
Ways of financing home improvements
Different kinds of loans can be brought into the picture when it comes to home improvements.
1. Personal Loans:
- Mid-sized home improvement projects can be financed with the help of a personal loan.
- They can help offset costs for regular overhauls and fixes.
- These loans are unsecured, that means no collateral is required to take the loan.
- These loans are a little expensive as it comes with high-interest rates around 11-12% and additional applicable charges.
- Shorter repayment tenure
2. Home Equity Line of Credit:
- These are secured loans.
- The interest rates are similar to home loan interest rate.
- Variable interest rates bring in the uncertainty and also the interest payments might be different for different months.
- They are a good option for big home renovation projects such as tiling, painting etc.
- You must have sufficient home equity- a home which commands higher value compared to the amount owed on that house.
3. Home equity loans:
- These loans are also called second mortgage loans.
- They come with an interest rate of around 11-13%
- The processing fee is charged- 0.5-1% up to Rs. 50000
- Refinancing allows you to replace your current mortgage with a new one.
- This means the interest rate will change.
- Refinancing also comes with several costs. The borrower might have to pay operational costs, origination fees, taxes, etc.
5. Credit Cards:
- They give you easy and quick access to funds.
- Limited documentation is required.
- The time to repay the amount taken is less when compared to other loan options.
6. Home Improvement Loans:
- Various lending institutions provide home improvement loans. Different lenders charge different rates.
- Up to 90% of the improvement estimates can be covered by these loans.
- Many institutions offer a repayment tenure up to 15 years.
- The interest rates are similar to that of home loans. 8-12%
The Best Option
Home Equity Loans and Home Improvement Loans are the best way to go for their long tenures, affordable interest rates and hassle-free processes. Always check the credibility of the lender and understand the terms and conditions before applying for a loan.