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What Is Property Tax? How To Calculate It?

What is Property Tax? When you buy a piece of property, you are often required to pay a number of taxes over and above the cost of the property when you make the purchase. Of these, Property tax or House tax is a tax levied on a property and is a percentage of the value of the property. Generally, there are three main types of methods that are employed to calculate property tax. The Rateable Value System (RVS), the Unit Area Value System (UAS) and the Capital Value System(CVS). Property tax rates are usually decided on a city-wide basis by the local municipal authority. In Mumbai for instance, the MCGM is responsible for setting property tax rates. In this article, let’s take a look at the various methods which are employed to calculate property tax rates. With this, you can look up the method employed in your city and carry out the calculation yourself so that you are sure of the exact amount you owe. [B-01] Types of Property Taxes 1. Annual Rental Value System/Rateable Value System(RVS): Under the Annual Rental Value System, the home loan tax calculator you would employ would first account for the gross annual rent of the property which is decided by the municipal body of that city. Various factors such as the condition of the property, amenities provided and distance to key landmarks can factor into this price estimate. Here is how the calculation would be calculated for property in Chennai. Rental Value of the property (Monthly) = Basic Rate/sq feet * Plinth AreaAnnual Rental Value = (Monthly Rental Value *12) – 10%.Based on this rental value the property tax will then be applied under the Annual Rental Value System. 2. Unit Area Value System (UAS): Under the Unit Area Value System or UAS, property tax accounting for stamp duty is calculated based on the per square foot price of the built-up area of the property. This square foot per month value is decided by the local authorities after factors such as expected returns, location, price of the land, occupation of the property.The following formula (or variations of it ) are likely to be applied in cities like Bangalore, Hyderabad, Kolkata and New Delhi.Annual Value = Unit Area Value * Covered Area * Use Value* Age Value* Structure Value* Occupancy Value 3. Capital Value System (CVS): In order to calculate property tax based on the Capital Value System or CVS, the stamp duty of the property has to be accounted for. In this system, once the stamp duty of the property has been set, which is usually carried out by the local authorities, the property tax for a loan against property, for instance, is calculated based on this value.Mumbai follows the CVS System, and the property tax based on the stamp duty is decided by the MCGM, the local municipal corporation. The calculation is carried out in the following manner. There are a number of variables that factor into the stamp duty and subsequent tax rate of the property such as the type of the property, what amenities are provided, the age of the property and the location, among others.The tax is then calculated based on the following formula :Property Tax = Tax Rate * Capital value.The rate, issued by the government based on the value of the stamp duty is revised on an annual basis. Conclusion. Buying your first home, making your first property investment or even taking a loan against your property can be an exciting prospect, though you should ensure you account for the property tax in order to avoid rude surprises later on. If you are looking for a home loan, a number of options are available on the Piramal Finance website. If you wish to apply for a home loan or take a loan against property you own on the Piramal Finance Website, you can follow these steps. [B-02] How to apply for a home on the Piramal Finance website. Navigate to the ‘Home Loan’ Section on the Piramal Finance website. Click the ‘Quick Apply’ button. Proceed to complete the form Upon submitting the form, you will be contacted by a representative with assistance shortly. To learn more about such types of topics, visit Piramal Finance.

08-11-2023

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Missed Your EMI? Here is What You Need To Do Next.

Defaulting your home loan EMI payment can be a distressing experience and often out of your hands. Here are some things you could do if you have defaulted on your home loan EMI payment to minimize the damage and prevent missed payments in the future. Types of Defaults on EMI Payments If you default on your home loan EMI payment, your action is slotted into one of two bands, based on the severity. Let’s take a look. 1. Minor Defaults: Since banks do not want to sour relationships with customers over one or two missed EMI payments, they slot customers who have made their previous payment within the last 3 months (90 days) into the ‘minor defaults’ category. This is a minor default if you made your EMI payment in January but missed February. 2. Major Defaults: As you would have come to assume by now, the ‘major default’ badge is given to those customers who have missed payments for the last three months or more. For instance, if your last EMI payment was three, four or more months before the month in question, this is a minor default. The Consequences The consequences could vary based on your relationship with the bank. They might settle for a lesser punishment if you have a good home loan track record and have missed only one or two payments. However, if the bank views you as a liability, the consequences for defaulting on your home loan EMI could be more severe. 1. Negative Effect on your Credit Score Defaulting on your home loan or home loan EMI payment can negatively impact your credit score (CIBIL score), as your credibility towards loan repayment reduces. Using a home loan EMI calculator to plan your home loan EMI payments is best. 2. Fines and Penalties. Banks will want to disincentivize borrowers from repaying their loans, resulting in penalties you might have to pay if you miss your home loan EMI payment. Generally, this penalty is about 1-2% of the EMI, though it can accrue quickly if you miss multiple payments. 3. Recovery and Legal action. Often considered a last resort, a lender might have to take legal action or send a recovery agent to retrieve the funds you owe, which can be a highly stressful experience. Here’s what to do next If you miss your home loan EMI payment, you will likely face the consequences. However, you can take action to ensure you do not default again, thus minimizing the penalties and negative impact on your credit score. Here are some things you can do. 1. Reduce your EMI payments If you cannot meet your home loan EMI payments, revisit the home loan eligibility calculator. Your bank requests that the EMI be reduced by extending the loan tenure or converting the loan into a secured loan by putting up collateral. 2. Part Payments If you have surplus resources, you could make part payments towards your home loan and pay off a bigger percentage to have more leeway. 3. EMI-Free Periods If you find yourself in the worst-case scenario where your income has been affected for an extended period, then you could also request your bank for an EMI-free period. Often granted by banks to customers with temporary unemployment, this allows EMI payments to be paused (usually for 3-6 months) to provide relief. [B-02] Conclusion Applying for a home loan can be tricky, as you have to account for your income in the future as well. If you are looking for a home loan, you can browse the various options on the Piramal Finance website, follow this simple sign-up process, and get loans up to 5 crores, with flexible repayment options.

08-11-2023

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How Home Loan Eligiblity Is Calculated On Your Salary?

For credit companies, the primary driver of profit is their lending activities. These include the provision of issuance of home loans, personal loans, or any other type of loan. One may assume that more loans would then mean more profit. However, this is only partly correct. A lender can only make a profit if the borrower can repay the loan, including the interest component. Thus, credit companies have developed stringent guidelines to assess whether a borrower will likely repay the loan. An example is the guidelines you may encounter if you’re trying to determine your home loan eligibility. A home loan often spans over a decade, and a lender needs a basis to ascertain what amount you can repay. One of the most efficient ways lenders come up with to assess this is through your salary. For a home loan or any other loan, the basic premise is that the more you earn, the more you can borrow because the more you will potentially be able to repay. Let’s, however, take a look at how this calculation is carried out so that you can carry out your calculations with or without a home loan eligibility calculator. How home loan Eligibility is calculated You are borrowing money from a lender as part of a home loan. The risk that the lender is exposed to varies based on each borrower. To streamline the determination of a borrower’s eligibility for a home loan, some common base parameters have been set across lenders, regardless of the home loan amount, repayment tenure, or home loan interest rates. Let’s take a look at some of these criteria. Age: To get a home loan, the borrower has to be between the minimum age of 23 and a maximum of 62 years of age. Credit Score: Your credit score is essential to ascertaining your repayment credibility, and much emphasis is placed upon it. Therefore, your credit score has to be a minimum of 750 or above. Salary: To get a home loan, you must earn a minimum of Rs 25,000 per month. Experience: It is also mandated that an individual have about two years of work experience before they can apply for a home loan. Loan-to-Value (LTV)Ratio: Up to 90%. This refers to the percentage of the property value the lender can lend to the borrower. These are minimum home loan eligibility criteria that have to be met. Over and above this, however, specific lenders might have specific parameters you might have to meet, which can be either more stringent or lenient. However, none of these parameters superseded your income level. You are restricted to certain loan amounts and interest rates based on your salary. Typically, you will be eligible for a home loan whose EMIs do not exceed 40 – 50% of your net monthly income. A Home Loan Eligibility Calculator Knowing how your home loan is calculated is undoubtedly beneficial so you do not end up paying extra. However, carrying this process out manually to account for your salary can be time-consuming and taxing. To save time, you could use a home loan eligibility calculator to make your assessments. However, ensure that you are not relying solely on the calculator and understand the specific requirements of your chosen lender. [B-02] Conclusion Taking out a home loan can be a daunting task. You also do not want to overextend yourself as you have to be sure about your income for the loan period to ensure you do not miss payments, and if you want a larger loan, you might have to look for a higher salary as well. Understanding how home loan rates are calculated, and home loan eligibility ascertained based on your salary is important in accurately gauging your repayment capacity, ensuring you take a loan that is comfortable to repay and does not cause you any trouble. If you want a home loan, the Piramal Finance website has several offerings for all income bands, meaning you are likely to find a loan for you regardless of what salary you earn (as long as you meet the minimum requirement). Here’s how you can apply.

08-11-2023

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Why Filing an ITR is Important to Avail a Home Loan?

In the 1990s and early 2000s, buying a house was considered a necessity. Given the relationship between the average income rates people were earning and the home prices being offered to them at the time, it was not uncommon (quite the contrary) for an individual to be able to purchase a house for themselves using a year or two's worth of salary. Buying a house and starting a family was a fairly simple affair. With property rates skyrocketing the last two decades, however, it has become a distant dream for many to be able to purchase a house for themselves right out the gates, with many spending their entire careers pooling together and saving enough funds to meet the price of a simple one or two BHK (sometimes smaller) in a tier-one metro city, with tier two and three locales quickly catching up. As a result, individuals began looking for the best home loans, as it was the only way they could own a house. However, given the disparity between income rates and property prices, people oftentimes require decades to repay the loan, and banks need to ensure that they are confident you can repay the loan, resulting in several terms and documents required for a home loan. One such condition is that you have to file your income tax returns (ITR) to get a home loan and any subsequent home loan tax benefit. But why? Let’s find out! What does ITR refer to? ITR or Income Tax Return is essentially a form you have to fill that depicts the amount you earned in that year, the subsequent tax bracket you fall into, and, therefore, the amount of income tax you have to pay. Generally, 7 such Income Tax forms and bands are provided by the Income Tax Department. ITR Band Conditions ITR 1 For those earning 50 lakhs or less ITR 2 For those with income other than from “Profits and Gains from Business or Profession,” including income from capital gains, foreign assets/income, and other sources like legal gambling. ITR 3 For those earning 50 lakhs or more, including capital gains, rent, company profits, etc. ITR 4 For those earning ITR 1 + 50 lakhs additional income. ITR 5 For LLPs, associations, firms, etc ITR 6 For companies not claiming exemptions under Section 11 of the IT act ITR 7 For entities that fall under Section 139 (4A), (4B), (4C), (4D). Why do you have to file your ITR to get a home loan? Put, your ITR documents provide proof of your income, allowing banks to assess their risk and set interest rates accordingly. Let’s dive deeper for a better understanding so you can complete the procedure without a hitch and get the best home loans and the additional tax benefit! Some details include Your ITR should show that you have a stable income. This way, banks can rest assured that they have the capacity to repay the loan, allowing for potentially better interest rates. Income statements for the last three years are required as part of the ITR. If your ITR has not been filed, you could miss out on the best home loans and invite legal action from authorities. You will often be requested to provide a ‘net worth statement’ along with your ITR; if you own a business, audited financials will also be required. [B-02] Conclusion Filing your ITR is the first and foremost step in ensuring you are eligible for a home loan. Not only is it mandatory by law, but it also allows lenders to assess your repayment capacity. Providing all the right ITR documents will communicate to the lender that you are confident in your ability to repay. If you wish to apply for a home loan, you can choose from the multitude of options available on the Piramal Finance website. Here’s how you can apply.

08-11-2023

Tips & Advice

Pros And Cons Of Joint Home Loan

A joint home loan is a loan taken by two or more people with the intent of availing a higher loan amount along with equally shared responsibility of repaying the loan. The co-applicant shares the liabilities and benefits of the home loan with the primary applicant. This co-applicant may be the primary applicant’s spouse, parent, child, or friend. There are several pros and cons to applying for a joint home loan: Pros of Joint Home Loan: Eligibility: Factors like credit score, stable income, and other factors affect an individual's eligibility for a home loan. Hence, applying with a co-applicant reduces the primary applicant's credit risk and increases his chances of getting a home loan. Avail of higher Loan Amount: If both applicants in a joint home loan application are income-earning individuals, this helps in calculating home loan EMI affordability. This means the loan amount becomes considerably higher than for a single applicant or individual. This offers significant room for budgeting for a better home for both. Let’s look at an example here – Your sights are set on a house that is valued at Rs 40 lakhs, however your income status and bills only make you eligible for a home loan worth Rs 20 lakhs. Here, applying with a co-applicant can help. Both your combined financial status will allow for a larger home loan amount hence giving you access to the house of your choice. Interest Rates: Home loan interest rates can be lowered if a co-applicant is female. Since banks in India offer comparatively lower interest rates on loans given to women, including a female applicant on a joint home loan application is highly beneficial. Longer Tenure: Adding a younger co-applicant can help you extend the tenure of your loan, giving you greater repayment flexibility. A joint home loan can be taken with a child as a co-applicant to increase your loan tenure. Tax Benefits: A number of tax benefits are available for both the primary and secondary applicants on a joint home loan. The percentages depend on their contribution towards the principal and interest rates of the loan. Either applicant can avail of tax deductions of up to 2 Lakhs on interest repayment and up to 1.5 lakhs on principal repayment. In case of a rented property, the benefit of the entire interest rate can be availed. Cons of Joint Home Loan: Longer Documentation Process: Since a joint home loan involves two or more applicants, the documentation process is usually longer. The lending organization has to verify the credit history of both applicants. Lending organizations also have to ensure that each applicant submits the required documents individually and that these documents are accurate and not forged. This process can be tedious and time-consuming, which in turn delays the disbursement of the loan. Share of property: Co-applicants only get a limited share of property on a joint home loan. Thus, in case of the untimely death of an applicant without a properly documented will, the co-applicant is only left with less than half a share of the co-applicant’s. The rest is shared among the co-applicants parents, spouses, and children. Credit Score: Since a joint home loan offers flexibility or autonomy in sharing responsibility, such as who repays what amount, it also means that the credit scores of both applicants are equally at stake. Failure to pay loan installments by either applicant will affect the credit scores of both applicants on a home loan application. Separation of loss of a co-applicant: In the case of separation from a co-applicant, let’s say, in the case of a married couple, the entire responsibility for repayment of the loan then falls on the primary applicant. The same thing happens in case of losing the co-applicant to an untimely death. In such cases, it is always advisable that individuals apply for life insurance to avoid unexpected financial burdens. [B-02] Conclusion: Thus, we can see that a joint home loan can be extremely beneficial in many ways for new homeowners, provided one is aware of the risky paths to be avoided. A joint home loan can allow aspiring homeowners to realize their wishes quickly if planned carefully and chosen well.

08-11-2023

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How To Choose The Right Tenure For Your Home Loan?

A house is one of the most pricey purchases in life. Though having your own house is still a big deal, long gone are the days when people slogged and saved all their lives and then bought a house. Thanks to the easy availability of home loans, buying a house is now a much more attainable dream. You can borrow a home loan from a bank or a financial firm like Piramal Finance. Different home loan types are available for you to choose from based on your requirements. However, the real twist is deciding the right home loan tenure. Tenure refers to the number of years in which you would have to return the loan amount to the institution in the form of EMIs. [B-01] Factors to Consider When Choosing the Right Tenure For Your Home Loan Choosing the right tenure for your home loan can be confusing. To help you out, here are the top three factors that you should consider: Age of the borrower Overall interest rate Your income For How Long Should You Take a Home Loan? After considering the factors mentioned above, let’s understand through an example. So, suppose you are a 30-year-old male borrower with an income of INR 1 lakh per month, and you are looking forward to getting a home loan of INR 20 lakh. So, let us see how your chosen tenure will affect the EMIs you will have to pay. Loan Amount Rate of Interest Tenure Monthly EMI 20 lakhs 11% 10 years INR 27,550 20 lakhs 11% 15 years INR 22,732 20 lakhs 11% 20 years INR 20,644 20 lakhs 11% 25 years INR 19,602 20 lakhs 11% 30 years INR 19,046 5 Tips to Reduce Rate Other than the loan tenure, other aspects can help you get the best possible deal when planning to take a home loan. Let us take a look at some golden rules that you must keep in mind: Make frequent prepayments Research Choose the shortest possible tenure Higher Down Payment Increase EMIs when possible [B-02] What is the Best Home Loan Tenure? Sadly, there is no perfect answer to this question. For different individuals, there could be different suitable tenures. Therefore, the tenure you choose has to suit your requirements the most. However, you must remember that the home loan interest rate or the EMI does not affect other life expenses too much. As discussed above, if you can pay higher EMIs, you can choose a shorter tenure, but if you are looking for affordable EMIs, you can opt for a longer tenure. Use a home loan EMI calculator to clearly understand the interest rate and EMIs.

08-11-2023

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Tax Planning: Its Importance, Investments to Consider, and Steps to Tax Planning

Saving the right amount of tax depends on your income tax planning. Certain tools will help you save tax by extending the Income Tax Act’s deductions. But don’t worry! It is not as complicated as it seems to be. If you take the necessary precautions and steps that promote legal tax savings, it can benefit you. Start your tax planning process by understanding how much you want to save. After that, you can determine your risk appetite and see the amount of tax exemption you could get from those investments. This way, you can meet your financial goals quicker with a balanced amount of tax that you would have to pay. If you keep delaying your tax planning, you might save no money. So, keep all your plans ready to protect yourself from the rush and stress that comes as the ITR filing date is nearing. [B-01] Types Of Taxes Direct Tax: This tax is levied on and paid by the same person. The burden of these taxes cannot be shifted to another. For example, income tax. Indirect Tax: This type of tax is imposed on the goods and services that the customers avail. Hence, the burden of the tax shifts to the person purchasing the goods and services in the end. For example, GST. They are an essential fiscal policy tool of the Government. The authorities determine the tax rates, and everyone paying taxes must abide by them. Importance Of Income Tax Planning The benefits of tax planning extend beyond a single fiscal year. It allows you to understand your future financial goals and helps you achieve them. A long-term investment yields a higher return than a short-term one. Special investments can be added to your income tax planning process. We will read about them later in this article. They instill a sense of healthy spending within the mind of an individual. This is because they motivate you to keep aside some of your income for investments that will help in tax savings. The investments offer tax savings, returns, and transparency that build investor confidence. Many deductions mentioned in the Income Tax Act can be availed if the investments are made smartly. Tax-exempt securities can play a major role when tax planning is done. Investments To Consider During Tax Planning Here are certain investments that are to be included in your income tax planning task so that you can avail of the deductions during ITR filing: Fixed Deposits: Section 80C of The Income Tax Act, 1961, allows you to avail of a deduction of up to INR 1,50,000 if you invest in tax-saving fixed deposit schemes. However, your money will be locked in for 5 years, and you must pay taxes on the interest rate ranging from 5% to 8%. Public Provident Fund (PPF): In this, you have to open a PPF account with a bank or a post office. You will be given a fixed interest rate on your investment, and up to INR 1,50,000 can be saved through section 80C. National Savings Certificate (NSC): Under Section 80C, mid-level investors can enjoy tax benefits with the bonds issued. With a savings account in a bank or a post office, you can buy an e-certificate through online banking. Unit Linked Insurance Plan (ULIP): These offer you a chance to choose between debt and equity investments, and you can shift the allocation. You can avail of tax savings under Section 80C and 10(10D). Life Insurance: These plans not only provide security for you and your family, but they also have a lot of tax benefits. Under Section 80C, the premium paid is tax deductible up to INR 1,50,000, and the amount received on maturity or death is tax-exempt under Section 10(D). Tax Saving Mutual Funds: These are also called equity-linked savings schemes. The lock-in period is 3 years; investors with a medium or high-risk appetite invest in these. These investments are deductible under Section 80C; in case of death or maturity, they are free from tax under Section 10(D). Mediclaim: These offer deductions under Section 80D. For senior citizens, the tax benefit is INR 20,000, and for other citizens, it is INR 15,000. So, if you have a policy that includes you and your senior citizen parent, you can get a tax benefit of INR 35,000. Steps In Income Tax Planning Keep your tax planning perfect to avoid panic when it is time for ITR filing. Here are the steps you need to know: Don’t Consider It to Be Cumbersome: This is one of the biggest mistakes you can make when considering starting your tax planning. The procedure is simple and can be done with careful consideration. Start At an Early Stage: Do not delay the planning until the date of ITR filing comes near. Also, tax planning is a continuous process and does not stop until the ITR is filed. Calculate Your Taxable Income And Tax Liability: If you know your tax liability, you will be able to estimate the amount of tax savings you have to make. So, to save on tax, you need to invest in assets that offer this benefit. Know Your Risk Appetite: Estimate the risk you are willing to take. This will help you decide on the right investments for your portfolio. Invest: The final step in income tax planning is to invest your money in tax-saving investments based on your risk appetite. [B-02] Key Takeaways There is no cap on the number of tax-saving investments you can make. So, pay close attention to your tax planning and maximize the benefits. Different assets have different tax-saving limits. Do your research correctly and be a smart taxpayer. Piramal Finance offers you relevant information regarding multiple banks across India. You can visit our website for any banking loan-related query or understanding of tax resolutions. The financial experts will help you better understand your bank account and make informed financial decisions.

08-11-2023

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Features And Benefits Of Home Extension Loan.

Human beings are built of dreams and aspirations. As we grow, so do our dreams and the need for bigger space to accommodate those dreams. But it is not always in our budget to afford that space or that construction. As our children grow up or our parents grow older and decide to move in with us, the need for their personal space arises. At this point, we either need to buy a bigger house or expand our existing one. Since buying a newer or bigger house is not the most practical solution, because it involves total uprooting, usually, people go for home expansions. Even though construction of expanding areas in a house also needs funding, this is comparatively lower than buying a whole new house. A home extension loan is your support for realising your dreams, for providing you access to comfortable living, and allowing the maximum potential for growth as a family. [B-01] So, What is a home extension loan? A home extension loan is a loan availed with the intention of making construction-related changes to an existing home. This change can be in terms of any structural changes to the existing house. There can also be any extensions in the form of new floors consisting of bedrooms to accommodate newer family members, children, spouses or parents, and in-laws. Sometimes, homeowners may decide to open up recreational areas in the form of a gym/pool, maybe a personal office space, a dedicated puja room, a home theatre, or simply a bigger entertaining space. To fund this change or expansion, homeowners may opt for a home construction loan. Who can avail a home extension loan? A home extension loan can be applied for by anybody, given the applicant has the capacity to repay the loan and also holds a good enough credit score. One can apply for a home construction loan individually or jointly with a co-applicant. If an individual already has taken up a home loan, he or she may choose to take up a home extension loan from the same providers or lenders as an extended facility to the existing loan. And like a regular home loan, all co-applicants will be equally liable in repayment of the home extension loan too. To put into better perspective, home construction loan eligibility is calculated by looking at an individual’s financial background in terms of Age (21 -70), kind of job (Salaried/non-salaried), the credit score (750 and above). Even outside of this, a background check involves several other factors like the applicant’s income, assets and liabilities owned, etc., evaluated by the lender before lending the loan. Let’s look at a few benefits of a home extension loan: Interest Rates: Home extension loans have extremely attractive interest rates. These are mostly similar to home loans but again depend on the income and financial stability of the applicant. The applicant may opt for either an adjustable-rate loan where the rates are reset periodically depending on the market or fixed interest rates that remain constant throughout. Tax Benefits: Home construction loans also provide highly generous tax benefits somewhat similar to a home loan. This means applicants may enjoy up to 2 lakhs on the principal component and up to 1.5 Lakhs on the interest component of the home construction High Loan to Value Ratio: What this means is home extension loans cover high costs. This usually covers 100% of the costs involved in construction or close. Tenure: The tenure to avail of a home construction loan is usually a maximum of 20 years. However, again, like all things above, this too depends on your age, income, and other supporting conditions at the time of application. Documentation: The documents required for a construction loan are typically simple and straightforward. These mostly include: Identity proof Age proof Proof of income (salary slips or bank statements) Estimated construction plans (approved by local authorities) [B-02] We can conclude that home extension loans are fairly easy to obtain and are a better option compared to buying a new house or taking up a home loan.

08-11-2023

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Things You Must Know Before You Avail A Home Renovation Loan

Your home is your safe space and it needs to be in robust conditions in order to serve you with that safety. With time, our house loses its shine and it needs our attention in terms of repairs. It is extremely important to care for our home because over time, external conditions like rain or calamities as well as internal conditions like old faulty electric systems can quickly turn dangerous. Hence refurbishing should be a regular practice to maintain the quality of your property. But remodelling or repairing a house is like servicing a car – it can be expensive. Material and labour costs are increasing every day. Here, let us get to know about home renovation loans. A home renovation loan is a loan taken up for the expenses of renovating or repairing a house. It is the best way to finance a home improvement but not a lot of people are aware of it. Use cases may include any repairs in a faulty system, such as painting the house’s interior or exterior, plumbing, upgrading the electrical system, waterproofing the ceiling, and more. It helps homeowners increase a house’s retail value as well as its aesthetic appeal. Here are some things you should know about before you avail of a home renovation loan: [B-01] After Renovation Value A home renovation loan amount is calculated on the basis of one key factor – the value of the home post renovations. Instead of a house’s current value, lenders or banks bank on a home’s estimated post-renovation value to calculate how much an applicant can borrow. This provides the opportunity to avail higher amounts on an improvement loan. Renovation loans are the ONLY type of loan that provides credit based on future value. Also, since real-estate values only ever go higher, home renovation loans are in fact a great investment on top of being a loan. In case you wanna sell the house someday, you will have great value for your property. Home Renovation Loan Interest Rates Home renovation loan interest rates vary from applicant to applicant based on their CIBIL score, amount availed and tenure of the loan based on one’s capability to repay the loan. These rates are usually lower for renovation loans as compared to traditional home loans. One can opt for a fixed rate arrangement or even a floating interest rate model. It is important to compare different banks and lenders and their respective interest rates online before deciding on the best home renovation loans for you. Depending on your needs, different banks might provide customised features. Home Renovation Loan Eligibility The criterion for a home renovation loan is fairly straightforward : The applicant needs to be within 18 – 65 years of age at the time of application. The applicant must be either a resident or an NRI. The applicant may be salaried or self employed. The applicant must have a permanent residence or a rented residence which they have rented out for over 12 months. A good credit score of at least 700 or more. Home Renovation Loan Documents It is important to be prepared with the necessary documents in order to process a smooth eligibility check : Proof of identity (Aadhaar card, passport, driving license, Voter ID, etc.,) Proof of residence (water/Electricity bill, Aadhaar card, passport, driving license, etc.,) Proof of Income (salary slips, bank statements) Improvement/Renovation plans (received from civil engineer/architect) Home Renovation Loan Tenure Home renovation loans are available for a tenure of up to 1-5 years. Repayment options are flexible too. [B-02] Home Renovation Loan Fee There is usually a small percentage of the loan amount charged as processing fee. This percentage mostly varies from 1-3% depending on the lender. Therefore it is important to compare different loans before you come across the best home renovation loans. With some research and planning, home renovation loans can be an important tool in improving living conditions for individuals and in turn building up to greater real-estate value for their home.

08-11-2023