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.
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)
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.
Also Read: Pros & Cons Of Joint Home Loan