There are different types of home loan available for people. The most common home loans are the basic home loans for buying or constructing a house. Other than that, banks and financial institutions also offer loans for home extension and renovation. Both home extension and renovation are costly processes. Therefore, these home extension and home renovation loans can be very beneficial for homeowners. Let us know more about them, followed by the differences between the two.
What are home extension loans?
With time, people's requirements change. Families grow, as a result of which people require more rooms. Other than that, people also wish to add certain features to their houses. Some people build a balcony because their previous house lacked one. Others want to transform the excess space into a lawn, pool or a garden. Adding a floor to single or double storey houses is also a common occurrence. Although these home expansion processes are not as costly as buying an entire home, they still cost a lot. Therefore, these home extension loans come to use.
People wishing to extend their homes can avail for a home extension loan from a bank or financial institutions.
Here are the features of home extension loans.
- Simple eligibility criteria
- Great interest rates
- 90% to 100% of the extension value is given as principal amount.
- Long repayment tenure
- Easy documentation
What are home renovation loans?
Every home needs renovation at some point. As houses age, brittle plasters affect the walls. Simultaneously, the woodwork starts to wear off and the roof starts leaking. Therefore, these houses need repairing. Some people also love remodelling and renovating their houses to give them a different look. All such renovation and alterations require a lot of money. Thus, banks and financial institutions offer home renovation loans. These loans are easy to access and have simple eligibility criteria.
Some features of home renovation loans in India include:
- Easy eligibility criteria
- Low interest rates
- Quick approval and disbursal
- High loan-to-value ratio
Difference between home extension loan and home renovation loan?
Both home extension loans and home renovation loans are useful for people who want to improve their homes. They are both easy to obtain and offer attractive interest rates. However, both have their own pros and cons. Here are some differences between the two.
While renovating, it is mandatory to shift to a new temporary residence. This has its own expenses and the process is hectic as well. But if you're adding a room or a floor to your house, there is no need to shift. In this respect, home extension loans are more convenient.
Ease of approval
Although both the loans get approved fairly easily, home renovation loans have a higher rate of approval. This is because they are more popular and lenders are more comfortable granting home renovation loans.
Home extension loans are almost similar to conventional home loans. They also have similar tenures for repayment through EMIs. They have long tenures, thus offering affordable monthly instalments. Home renovation loans have comparatively shorter tenures.
Home extension loans are comparable to the usual housing loans. Therefore, lenders sometimes require collateral against which they grant extension loans. Home renovation loans have no such requirements.
Home renovation loans require minimal documentation and can be disbursed within only a few minutes. Home extension loans also require only basic documents. But lenders make a little more inquiry while granting the latter.
Flexibility to spend
One of the biggest advantages of home renovation loans is that they allow you to allocate the funds wherever you want. You can use the granted loan amount to do any kind of work you wish to do. You can invest it in carpentry, plumbing, masonry or anything else you like. As for home extension loans, you can only spend them for a particular cause.
Balance transfer facility
Loan balance transfer allows you to transfer your outstanding loan balance to another lender for lower interest rates. This helps reduce your burden of debt. It also allows you to extend your repayment tenure as well. Most home extension loans enable borrowers to transfer their loan balance. It is less likely to be available for home renovation loans.