Taking a home renovation loan on an already mortgaged property

 

Holiday home renovation loan
One significant difference between a home purchase loan and a home renovation loan is the certainty about exactly how much money you will need.

Want to renovate your home, but short on funds?  Already taken a loan to buy the property? Well, doesn’t matter, you can still take a loan to fulfill the dream to renovate your home!

Home renovation loan or the home improvement loan are given by most banks for repairs and renovation like complete interior renovation, internal and external repairing, tiling and flooring, waterproofing and roofing, etc. These loans are given for implementation of repair works in a home that has already been purchased. The sanction limit for renovation loans or home improvement loan is around 80% of the property cost. This percentage includes the home loan amount as well.

PROCEDURE:

1. To avail the home improvement loans first you have to estimate the amount required for extending the house and then submit the plans to your bank.

2. After making a list of the renovation work you plan to carry out, take a quotation from a qualified civil contractor or engineer or architect.

3. Once you have the quotation in hand, submit the same must to the bank for approval along with the application form.

4. Home improvement loans are sanctioned only after the original property papers are in order. Since you already have taken a loan to buy the property you have to take the loan from the same bank because the original property papers will be with the bank, which will not be in a position to transfer them to another bank while the home loan payment is still on.

5. The technical department of the bank will then approve the quotation.

6. The bank will again evaluate your repayment skills and your current credit and debt statuses. If everything is found to be satisfactory the loan will be disbursed.
7. The entire process takes around 1 to 2 weeks if all the papers are in order

DOCUMENTS REQUIRED:

Salaried Customers Self Employed Professionals Self Employed Businessman
Application form with photograph Application form with photograph Application form with photograph
Identity and Residence Proof Identity and Residence Proof Identity and Residence Proof
Latest Salary-slip Education Qualifications Certificate and Proof of business existence Education Qualifications Certificate and Proof of business existence
Form 16 Last 3 years Income Tax returns (self and business) Business profile
Last 6 months bank statements Last 3 years Profit /Loss and Balance Sheet Last 3 years Income Tax returns
Last 3 years Profit /Loss and Balance Sheet
Processing fee cheque Last 6 months bank statements Last 6 months bank statements (self and business)
Processing fee cheque Processing fee cheque
Detailed cost estimate from architect/engineer for the property to be constructed/ renovated.

THE FINE PRINT:

To avoid miscommunications and disappointments, it is necessary to know everything about home renovation loan before you submit your quotation. There several items excluded from the list of renovation. For instance if you are looking to construct a fireplace, it will not be passed.

The bank provides around 80% of the estimated amount, which means that you need to provide the rest 20 percent. Many banks may ask for proof of payment of this 20 percent before the loan is disbursed.

The bank can be really fussy about the paperwork, considering the current economic conditions where we keep hearing about defaults every second day. So sit with the banker and discuss the paperwork thoroughly with him to avoid getting hassled in the future.  

Many banks charge 1% of the loan amount applied plus applicable service taxes and cess as processing fee. This can be negotiated.