Here’s How You Can Increase an Existing Home Loan Amount

Many individuals dream of leading a happy life in a house of their own. And with the help of a Home Loan, they even find themselves able to fulfill this ambition.

But then gradually as they begin living in their new homes, many scenarios tend to arise. They realize that the flooring needs work, or that a fresh paint job could be done for the kitchen, or they may even consider changing all of the living room furniture.

If a person does not have sufficient extra income or savings they’re likely to take a loan.

In such a situation, it is possible for the person to take a new loan for the purpose of home renovation/repair.

But another option is to refinance the current Home Loan to fund the renovation.  In this, it will be possible to change any one or more features of the Home Loan, such as the loan tenure, amount, rate of interest, or even the lender.

Here are a few things you should keep in mind before going for this option:

Interest rates

The interest rate for loans can change over a period of time on account of different conditions in the market. Keep in mind that a Home Renovation Loan falls into the category of a personal loan. Hence the interest rate for it will be different from that of a Home Loan. Essentially, one can consider going for the loan that offers a lower rate of interest.

Tenure

When you take a new loan, it can be possible for you to choose the loan tenure that suits your needs. However, when you choose to borrow money on the basis of a current loan, you may have to borrow the amount with the same tenure as that of this loan. Home loans can have a longer tenure of 25 to 30 years. This means that you can end up paying more interest.

Hence, it is important to also evaluate the interest you end up paying over the tenure of a loan. Which can mean a comparison between a new loan with a higher rate of interest vs. the current loan with a lower interest rate but longer tenure.

Tax Benefits

It is worth noting that Home Loans are eligible for tax deductions. So the monthly EMIs can be deducted if they fall under INR 3.5 lakh in a year. However, a lower amount of tax benefits is applicable for a home renovation loan. So even going for a longer tenure through an existing Home Loan can be cost effective if this is compensated by more tax benefits.

All of these factors must, therefore, be considered before choosing a loan option. And soon you may find your home and finances are both in great shape.