Home Loan

Advantages And Disadvantages of Home Renovation Loans You Need To Know


A home renovation loan is one that’s secured by your home. This is often known as a home equity debt or a secondary mortgage. The perks of this form of loan include the ability to get a larger loan sum at a fixed rate of interest and have 10-15 years to repay it. 

A key perk of using this form of financing for home upgrades is that interest is very often tax-free. The main downside is that if you fall behind on your payments, the bank may seize your house. 

The age, condition, area, and size of the land, as well as your credit rating, all affect whether or not you qualify for this sort of credit, how much you qualify for, as well as the interest rate. In addition, the rules of your loan may exclude you from renting out your house.

Criteria for Home Renovation Loan Eligibility

If you are looking for a home seating loan or even a loan to do any other sort of repair work, you must meet precise needs to be granted a loan. These are as follows:

  • The minimum age must be 18 years old, and the upper age limit must be 65 years old.
  • You must be a native Indian or a non-resident Indian.
  • You must be a salaried or self-employed person.
  • You must have a fixed rental property where you have resided for at least a year previous to applying for the loan.
  • A solid credit score is needed. This must be 700 or above. 

The Benefits of a Home Renovation Loan

Let’s start with the superb things. Let’s go over a few of the benefits of updating your house with a house renovation loan.

  • Increases The Value of Your House

One of the key reasons many opt to remodel is to boost the worth of their house. If done correctly, updating may be a great method to raise the value of your home. This means more cash in your pocket when it’s time to sell. Kitchens and restrooms are the most typical remodel targets.

  • Less Costly Than Purchasing a New House

Maybe you’re tired of your bathroom faucet always leaking. Or, you despise that ugly carpet. When all the costs of purchasing and selling a house are included, updating often ends up being good for the budget.

  • Personalisation

When you remodel, you may make changes that are specific to your tastes. Do you, for example, like the aesthetic of a feature wall? You may use whatever colour you want and place it wherever you like. If you like lengthy showers, you might think about building a low-cost rainwater shower. You can add to or modify anything in your house; the choices are almost endless.

  • Room to Grow

You may expand your house to fit a growing family or a new lifestyle if desired. It is solely up to you whether you install an extra bathroom at the rear of the home or pull down a wall to make more space.

  • Makeover/Update the Look of Your Home

Finally, updating your house enables you to make changes to your daily life. Whether adding solar panels on your roof to reduce energy expenses or installing a new cooktop that isn’t from the 1970s, you can make your house more trendy and sleek without having to relocate.

The Drawbacks of a House Renovation Loan

Aside from the perks of a home renovation loan, there are certain drawbacks to ponder before drafting blueprints and breaking down walls.

  • Overcapitalising

Renovations are expensive, and among the most typical errors is overcapitalisation. As said before, when done correctly, updating may boost the value of your property. If this is not taken into account, you may wind up spending cash on a repair that will not boost the worth of your property. For instance, if you spend Rs. 50,000 on a modern kitchen but it only adds Rs. 20,000 in value, you have overcapitalised.

  • You May Need Help to Get Your Cash Back

Overcapitalisation costs money. Also, if you build special upgrades for yourself and your lifestyle, this may be unappealing to sellers. For instance, if you coloured a bright green accent wall may put off potential owners or be seen as a flaw.

  • Renting While Undergoing Renovations

If you’re making major structural repairs to your house that will render it unlivable for an extended time, you may need to rent another place while the work is being done. This may be pricey since you must not only pay your debt and fund your recovery project but you must also cover your rent.

How to Pick a Home Renovation Loan

Here’s a summary of how to obtain the greatest deal for your budget. Find the best match for your needs by evaluating choices for a home renovation loan

  1. Examine Your Credit Score

When asking for any loan, keep in mind that your credit score is vital in securing the lowest rate of interest. Consider taking actions to boost your credit score if you have the time, such as paying off credit card debt and making all on-time payments. 

  1. Calculate the Total Cost of Your Task

What are your labour costs going to be? What about resources? Will you need to find other housing while the work is in progress? Create a detailed budget. That amount will assist you in determining which loan is ideal for you, as well as estimating your monthly payments.

  1. Compare Prices

Look over payment terms and costs from a few distinct banks. You need to do this whenever you make a major financial choice. Rates and fees differ from one bank to the next. So, do your homework to ensure you receive the best offer. The only thing finer than remodelling your house is remodelling it while knowing you’re receiving a fantastic bargain on your loan.


As interest rates are low, now is a wonderful time to seek a home renovation loan. It’s also critical to have a real concept of project expenses. So, you can get the correct form of financing with the best interest rate and payment terms.

If you want to learn more about home renovation loans, visit Piramal Finance and explore their products and services.