Most banks and housing finance companies give loans for renovation and reconstruction of a house. Let us say you have a single storey house,...
Most banks and housing finance companies give loans for renovation and reconstruction of a house. Let us say you have a single storey house, and you want to construct two more storeys on it for self use or for giving out on rent. Or let us say you have a two bedroom house and want to construct a few more rooms. You may want to reconstruct an old house and renovate. All these can be financed and will be categorised under housing loans. Most banks finance such reconstruction or renovation expenditures.
In addition to loans to buy a new or existing house/flat and constructing a new house, loans are also available for renovation, alteration, and extension of existing house/flat. You need not shell out the entire sum out of your pocket to extend, repair, renovate or alter a house/flat.
Usually, the terms and conditions for such loans are the same as those for general home loans. Individuals over 21 years with a steady source of income are eligible. The loan amount varies between different banks. While there is no upper limit to the amount of loan you can get, the actual loan amount is determined on the basis of repayment capacity taking into account income, age, assets and liabilities.
Usually, the margin requirements are 20 to 30 percent of the project cost. What this means is that the bank finances upto 80 percent of the projected expenditure. The balance 20 or 30 percent is to be financed by the borrower from his own resources. Further, as a rule of thumb, the project cost should not exceed 45 to 50 percent of the value of the property.
One primary condition for availing this loan is the property should be in the name of the borrower. As a security, the bank may insist on equitable mortgage of the property. Depending on the amount required and the policy of the bank, adequate additional security through lien over the credit balance in a deposit account, guarantee by a third party etc may be insisted upon. The guarantor should be of adequate financial means. The additional security/guarantee will be released at the discretion of the bank after the loan amount together with the accumulated interest is repaid by the borrower.
In the case of an old, existing house, you may need to get a valuation certificate from an approved valuer as well as a certificate from a government-approved architect or structural engineer on the condition of the flat/house as well as its remaining lifespan.
Usually, the same rate of interest is charges, as is charged on a general home loan, depending on the amount borrowed, tenure and mode of interest - fixed or floating -selected.
The loans are available for short, medium and long-term tenures - usually upto 15 years. Some banks give a moratorium of period of 18 months i.e. the repayment of loan starts after 18 months.
Processing charges as applicable, ranging from 0-2 percent of the loan amount are leviable and payable upfront. Many banks waive off the processing fees on loans availed during the festive seasons.
Some banks insist that the house or flat should be insured for its full value in the joint names of the borrower and the bank at all times against fire, earthquake etc. The cost of the insurance must be paid by the borrower. As an incentive, some banks are ready to foot this cost as the premiums are not very high.
In addition to the usual documents, the borrower needs to submit these too:
Proof of ownership of house
Estimated expenditure
Break-up of estimated expenditure, certified by an architect or valuer
New approved building plan
Valuation certificate
The repayment is through equated monthly instalments (EMI). In case of loans borrowed for the purpose of reconstruction or repairs for a house, the maximum amount of deduction on account of repayment of interest available is Rs 30,000 and not Rs 1.5 lakhs.
Courtesy: TimesofIndia
In addition to loans to buy a new or existing house/flat and constructing a new house, loans are also available for renovation, alteration, and extension of existing house/flat. You need not shell out the entire sum out of your pocket to extend, repair, renovate or alter a house/flat.
Usually, the terms and conditions for such loans are the same as those for general home loans. Individuals over 21 years with a steady source of income are eligible. The loan amount varies between different banks. While there is no upper limit to the amount of loan you can get, the actual loan amount is determined on the basis of repayment capacity taking into account income, age, assets and liabilities.
Usually, the margin requirements are 20 to 30 percent of the project cost. What this means is that the bank finances upto 80 percent of the projected expenditure. The balance 20 or 30 percent is to be financed by the borrower from his own resources. Further, as a rule of thumb, the project cost should not exceed 45 to 50 percent of the value of the property.
One primary condition for availing this loan is the property should be in the name of the borrower. As a security, the bank may insist on equitable mortgage of the property. Depending on the amount required and the policy of the bank, adequate additional security through lien over the credit balance in a deposit account, guarantee by a third party etc may be insisted upon. The guarantor should be of adequate financial means. The additional security/guarantee will be released at the discretion of the bank after the loan amount together with the accumulated interest is repaid by the borrower.
In the case of an old, existing house, you may need to get a valuation certificate from an approved valuer as well as a certificate from a government-approved architect or structural engineer on the condition of the flat/house as well as its remaining lifespan.
Usually, the same rate of interest is charges, as is charged on a general home loan, depending on the amount borrowed, tenure and mode of interest - fixed or floating -selected.
The loans are available for short, medium and long-term tenures - usually upto 15 years. Some banks give a moratorium of period of 18 months i.e. the repayment of loan starts after 18 months.
Processing charges as applicable, ranging from 0-2 percent of the loan amount are leviable and payable upfront. Many banks waive off the processing fees on loans availed during the festive seasons.
Some banks insist that the house or flat should be insured for its full value in the joint names of the borrower and the bank at all times against fire, earthquake etc. The cost of the insurance must be paid by the borrower. As an incentive, some banks are ready to foot this cost as the premiums are not very high.
In addition to the usual documents, the borrower needs to submit these too:
Proof of ownership of house
Estimated expenditure
Break-up of estimated expenditure, certified by an architect or valuer
New approved building plan
Valuation certificate
The repayment is through equated monthly instalments (EMI). In case of loans borrowed for the purpose of reconstruction or repairs for a house, the maximum amount of deduction on account of repayment of interest available is Rs 30,000 and not Rs 1.5 lakhs.
Courtesy: TimesofIndia
