How do home renovation loans work?

A home renovation loan is similar to that of a home loan. A renovation loan is mostly taken to repair or renovate your house. If you fulfil the eligibility criteria of this loan, the bank will sanction the loan for a specific tenure. You need to repay the loan with a specified interest rate in the form of EMIs. .

Who is eligible for a home renovation loan?

Any salaried or self-employed individuals between the age group of 23 years and 60 years are eligible to apply for a home renovation loan. .

What are the tax benefits of a home renovation loan?

Under Section 24B of the Income Tax Act, you can get a deduction of up to Rs.30,000 each year on the EMIs of a home renovation loan. .

What type of security do I have to provide for a home renovation loan?

You can pledge a house or business in the form of a security for a home renovation loan. .

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Affordable Home Renovation Loans 2025

A home improvement loan is provided to provide money for remodelling, fixing up, or enhancing an existing residential property. These loans are designed exclusively to pay for the costs related to home upgrades.

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Bank	Interest rate	Best for
Bank of Baroda	Starts at 8.40% p.a.	Low Interest Rates
TATA Capital	Starts at 10.99% p.a.	Security/Collateral
Canara Bank	Starts at 6.90% p.a.	Low Processing Fee
PNB Housing Finance Ltd.	Starts at 9.10% p.a.	Higher Eligibility Criteria
HDFC Bank	Starts at 10.50% p.a.	Flexible Repayment Options
IIFL	Starts at 8.90% p.a.	Non-Resident Indians (NRIs)

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Home Renovation Loan Schemes and Offers

Bank of Baroda Home Improvement Loan - Best for Low Interest Rates
1. Interest rate: Starts at 8.40% p.a.
2. Loan tenure: Up to 30 years
3. Processing fees: Up to 0.50% of the loan amount [Min. Rs.7,500 (payable upfront); Max. Rs.20,000]
4. Maximum loan amount: Rs.10 crore
5. Can be availed for renovation/improvement/repair of an existing property
6. 36-month moratorium period available
TATA Capital Home Renovation Loan - Best for Security/Collateral
1. Interest rate: Starts at 10.99% p.a.
2. Loan tenure: Up to six years
3. Processing fees: Up to 2.00% of the loan amount
4. Loan borrowers need not provide any security or collateral to apply for the loan
5. Better loan eligibility
6. Prepayment Penalty: No prepayment penalty on partial repayment of the loan after 6 months from the date of availing the loan. However, if more than 25% of the outstanding loan amount is being prepaid, a fee of 2.00% of the amount being prepaid + GST shall be applicable.
Canara Bank Home Improvement Loan - Best for Low Processing Fees
1. Interest rate: Starts at 6.90% p.a.
2. Loan tenure: Up to 5 years
3. Processing fees: Up to 0.50% of the loan amount (Min. Rs.1,500; Max. Rs.10,000)
4. Can also be availed for furnishing the property such as purchase of furniture, home appliances, etc.
5. Simple documentation and quick processing
6. Prepayment Penalty: Zero prepayment charges on housing loans with floating rate of interest.
7. Plus Applicable Taxes
PNB HFL Home Improvement Loan - Best for Higher Eligibility
1. Interest rate: Starts at 9.10% p.a.
2. Loan tenure: Up to 30 years
3. Processing fees: Up to 0.50% of the loan amount (Min. Rs.10,000)
4. Plus Applicable Taxes
5. Can be availed for complete renovation of your exiting property
HDFC Bank Home Improvement Loan - Best for Flexible Repayment Options
1. Interest rate: Starts at 10.50% p.a.
2. Loan tenure: Up to 15 years
3. Processing fees For Salaried: Up to 0.50% of the loan amount or Rs.3,000 (whichever is higher)
4. Processing fees for Self-employed: Up to Rs.1.50% of the loan amount or Rs.4,500 (whichever is higher)
5. Home renovation loans at the same interest rate as of home loans
6. Plus Applicable Taxes
7. *Prepayment Penalty:
  1. No prepayment charges on both full and part prepayments for loans sanctioned to individual borrowers
  2. For others, a fee of 2% of the amount being prepaid plus applicable taxes will be levied if the loan is being prepaid within six months from the first disbursement. If more than 25% of the outstanding principal is being repaid in a financial year, between the 6th and 36th month of the tenure, 2% of the amount being repaid will be charged as prepayment fee. The prepayments will have to be made from the borrowers' own financial sources that the bank deems fit.
IIFL NRI Home Improvement Loan - Best for NRIs
1. Interest rate: Starts at 8.90% p.a.
2. Loan tenure: Up to 20 years
3. Processing fees: Up to 0.75% of the loan amount or Rs.3,000 (whichever is higher)
4. Plus Applicable Taxes
5. *Prepayment Charges: No charges for individuals. However, a fee up to 5% of the loan amount being prepaid shall be applicable depending on the duration after which the last disbursement was made.
6. Foreclosure Charges: Applicable on the entire loan amount while prepaying the loan completely.
7. Quick documentation and processing
8. Feature-filled improvement loan makes repayment easier

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Eligibility Criteria for Home Renovation Loan

Eligibility Criteria	Requirement
Age	Minimum Age: 18 years Maximum Age: 65 years
Resident Type	Resident Indian Non-Resident Indian
Employment	Salaried Self-employed
Residence	A permanent residence Or a rented residence where the applicant has resided for at least 12 months before applying.
Credit score	A good credit score of at least 700 or more issued by a recognised credit bureau

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Documents required for Home Improvement Loans

Eligibility Criteria	Requirement
List of Documents required from all applicants	Proof of Identity (any one): Aadhar Card Valid Driving License Voter ID Valid Passport PAN Card
Proof of Residence (anyone)	Copy of Electricity bill/Water Bill/Telephone Bill Valid Passport Aadhar Card Driving License Voter ID Card Duly filled loan application form affixed with 3 passport size photographs of all the applicants/co-applicants and signed across
Proof of Income for Salaried Applicants/Co-applicants	Salary slips or salary certificate for the previous 3 months Bank statements showing salary credits for the previous 6 months Income Tax Returns and latest Form 16
Proof of Income for Self-employed Applicants/Co-applicants	Balance Sheet and Profit & Loss account statements along with the Schedules/Annexures of the applicant and the business entity for the last 3 years (attested by a certified CA) IT Returns and the computation of income for the previous 3 assessment years of both the applicant and the business entity (attested by a certified CA) Bank account statements of the individuals and the business entity for the last 6 months
Proof of Income for Salaried Non-Resident Indian (NRI) Applicants/Co-applicants	Copy of Employment Contract Salary slips or certificates for the last 3 months Bank statements showing salary credits for the last 6 months Bank statements of the Non-Resident External (NRE)/Non-Resident Ordinary (NRO) accounts in India for the last 6 months Consumer Credit Check Report
Proof of Income for Self-employed Professional NRI Applicants/Co-applicants	IT Returns and the computation of income for the previous 3 assessment years of both the applicant and the business entity (attested by a certified CA) Balance Sheet and Profit & Loss account statements along with the Schedules/Annexures of the applicant and the business entity for the last 3 years (attested by a certified CA) Bank statements of the applicant current NRE/NRO account in India for the last 6 months Account statements of the business entity for the last 12 months Consumer Credit Check Report
Proof of Income for Self-employed Non-professional NRI Applicants/Co-applicants	Copy of the current valid contract Savings Proof Memorandum and Articles of Association Bank statements of the current, savings and NRE/NRO accounts in India for the last 6 months Qualification certificates IT Returns along with computation of income of both the individual and the business entity for the last 3 years (attested by a certified CA) Balance Sheets and P&L account statements along with Schedules and Annexures for both the applicant and the business entity for the last 3 years (attested by a certified CA)
Property/Home Improvement related documents	Property/Home Improvement related documents: Original Title Deeds of the property Proof of no encumbrances on the concerned property An estimate of the improvement project received from a Civil Engineer/an Architect
Other Documents	Own Contribution proof Memorandum and Articles of Association of the Company (for self-employed) Copy of valid resident visa stamped on the Passport (for NRIs) Bank statements indicating any ongoing loan repayments for the last 6 months Letter of Appointment/Employment Contract in case the applicant has not completed one year of employment under the current employer Bank account statements for all the bank accounts owned by the applicant for the last six months Processing Fee Cheque favouring the bank

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Loan-to-Value Ratio in Home Renovation Loans

The Loan-to-Value (LTV) ratio for a home renovation loan is a measurement of the loan amount in relation to the appraised value of the property. It aids lenders in evaluating the loan's risk.

The loan amount is subtracted from the property's appraised value to arrive at the LTV ratio, which is presented as a percentage. The LTV ratio is frequently an important consideration for home equity loans, which are frequently used for renovation. The percentage of a borrower's home equity may be constrained by the lender.

Loan Amount	LTV Ratio
Up to Rs.30 lakhs	100% of the estimated cost of renovations, provided that the LTV ratio doesn't exceed 90%
Rs.30.01 lakhs to Rs.75 lakhs	Up to 100% of the remodelling estimate as long as the LTV ratio doesn't go beyond 80%
Above Rs.75 lakhs	Up to 100% of the remodelling estimate, provided that the LTV ratio doesn't exceed 75%

Banks and Non-Banking Financial Companies (NBFCs) undertake a credit risk assessment in order to ascertain the final LTV ratio for the borrower. Some of the factors which are taken into consideration during the credit risk assessment procedure are applicant's repayment capacity, credit profile, property's valuation, etc.

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FAQs on Home Renovation Loan

How do home renovation loans work?
A home renovation loan is similar to that of a home loan. A renovation loan is mostly taken to repair or renovate your house. If you fulfil the eligibility criteria of this loan, the bank will sanction the loan for a specific tenure. You need to repay the loan with a specified interest rate in the form of EMIs.
Who is eligible for a home renovation loan?
Any salaried or self-employed individuals between the age group of 23 years and 60 years are eligible to apply for a home renovation loan.
What are the tax benefits of a home renovation loan?
Under Section 24B of the Income Tax Act, you can get a deduction of up to Rs.30,000 each year on the EMIs of a home renovation loan.
What type of security do I have to provide for a home renovation loan?
You can pledge a house or business in the form of a security for a home renovation loan.

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