Financing Your Dream Home: A Guide to House Loans and Renovation Loans

by Shivani Saxena

Buying a house is one of life’s biggest purchases. Owning a house means maintaining and developing it, not simply living in it. Home renovations maintain a property functional, pleasant, and modern.

Investing in renovations is smart as they raise the value of your home. However, not everyone has the ability to afford to invest in a renovation. This is where housing loans and remodelling loans come in.

This article discusses renovation loans and house loans, their pros and cons, and how to pick the proper loan for your restoration project. We’ll also explain how to renovate successfully. 

Understanding House Loans

Home loans are called mortgages. It’s a property loan. House loans allow borrowers to pay for a property over time, making them attractive for homebuyers.

When considering choosing between various home loans in India, borrowers have several alternatives to choose from based on what they need and the state of their economic situation.

  • Home Purchase Loan: A home purchase loan is a type of house loan in India that is taken out to purchase a new or resale property or land on which to construct a house. 
  • Home Construction Loan: A home construction loan is taken out when the borrower wants to construct a new house on a plot of land that they already own. It covers the construction cost and can be disbursed in instalments as per the construction progress.
  • Home Improvement Loan: A Home Improvement Loan in India is a type of loan taken out for repairing or renovating an existing property, including internal or external repairs, painting, waterproofing, electrical work, or any other home improvement projects.
  • Home Extension Loan: A home Extension Loan is taken out to add more rooms or extend an existing property.
  • Home Conversion Loan: Home Conversion Loan is taken to sell an existing property and purchase a new one. The loan covers both the new property’s purchase and the old property’s sale.

Moreover, there are other types of house loans in India, including Home Loan Balance Transfers, Top-up Loans, NRI Home Loans, and Pradhan Mantri Awas Yojana (PMAY) Home Loan.

Pros and Cons of House Loans

Every borrower should consider the advantages and disadvantages of house loans before applying. 


  • Allows individuals to purchase a home without having to pay for it all at once.
  • Provides stability and predictability in terms of monthly payments.
  • It can be a good investment if the property value increases over time.


  • Requires a down payment and monthly instalments that might be costly.
  • 15–30-year commitment.
  • Foreclosure can arise from a mortgage default.

Understanding House Renovation Loans

House renovation loans in India are a type of personal loan that can be used to finance home improvement projects.

These loans can be taken for a wide range of purposes, including repairing or renovating the house, upgrading the interiors, adding new rooms or extensions, improving the exterior, or purchasing new furnishings and fixtures.

In India, there are two types of home renovation loans:

  • Secured Home Renovation Loan: This loan can be secured by property, gold, or other assets. Banks provide it at a cheaper interest rate than unsecured loans.
  • Unsecured Home Renovation credit: Banks and NBFCs give this credit without collateral. Unsecured loans usually have higher interest rates.

Lenders in India consider the following aspects while determining eligibility for renovation loans:

  • Age: The lowest age for a home improvement loan is 21, and the highest is 65.
  • Income: The applicant’s income should cover the loan and other debts.
  • Credit Score: Home improvement loans require good credit. Most lenders accept scores above 750.
  • Property Ownership: The applicant must own or have a co-owner who will co-sign the loan.

Lender and candidate financial profiles determine the loan amount. Loan amounts range from Rs. 50,000 to several lakhs, and payback terms might be 1 to 10 years.

Also Read: All You Need to Know About Property Mortgage Loans and Interest Rates

Before applying for a home renovation loan, it is advisable to compare the interest rates and other terms and conditions offered by different lenders.

This can help you choose the loan that best suits your needs and budget.

Pros and Cons of House Renovation Loans

While a house renovation loan can be a valuable tool for homeowners looking to make improvements to their homes, there are also potential drawbacks to consider before choosing this financing option.


  • Homeowners may renovate their homes using house renovation loans.
  • House remodelling loans have cheaper rates than credit cards.
  • Home remodelling loans may be tax-deductible.
  • Renovation loans improve property value.


  • Renovation loans can raise home ownership costs and monthly payments.
  • Homeowners who fail on remodelling loans risk losing their homes.
  • Some house renovation loans have higher rates and fees.
  • Some house renovation loans require good credit and a steady income.

Factors to Consider Both these Loans

Homeowners should examine various considerations while choosing house loans and renovation loans. These include the loan amount, interest rate, repayment terms, eligibility, and renovation time frame.

Also Read: Renovate, Renew, Rejoice: Exploring Housing Loans And Home Renovation Loans

Homeowners should also compare loan kinds to get the right one. To prevent excessive debt or poor loan conditions, carefully analyse all of these issues.


Understanding house loans and renovation loans is essential for homeowners looking to improve their homes.

While house renovation loans can be a valuable tool, they also have potential drawbacks that should be carefully considered. 

Ultimately, by taking the time to research and compare different types of loans, homeowners can make smart financial decisions that benefit both their homes and their long-term financial stability.

Related Posts