How to Use Your Home Loan for Home Improvement Projects
June 11, 2025

Planning to renovate your house but short on cash? Instead of taking a high-interest personal loan that can put a strain on your finances, avail a Home Improvement Loan. A home improvement loan offers adequate financing at affordable interest rates to renovate your existing house. You can also use the loan amount for any kind of repair work.
Whether it's a small renovation project or a complete overhaul, using your home loan for renovation can be a smart financial move. With the right approach, you can make your dream home a reality without breaking the bank.
Benefits of Using Home Loan for Renovation
Home improvement loans come with several benefits:
- Lower Interest Rates: Home loans generally offer lower interest rates compared to other financing options like personal loans.
- Longer Repayment Tenure: Home loans often come with more extended repayment tenures, making it easier to manage monthly instalments over time.
- Tax Benefits: The interest paid on a home loan for renovation is eligible for tax deductions under Section 24(b) of the Income Tax Act, 1961.
The Home Loan for Renovation Process
The process of using your home loan effectively for home improvement projects is as follows:
1. Assess Your Financing Needs
Before diving into your home renovation project, it's important to assess your financing needs. Determine how much money you will require for the renovations and create a budget. This will give you a clear picture of the funds you need to borrow.
2. Evaluate Your Home Equity
Next, evaluate the equity you have in your home. Equity is the difference between the market value of your property and the outstanding balance on your home loan. This equity can be used as collateral to secure additional funds for renovations.
3. Research Banks
Once you know how much financing you need, research banks who offer home loans for renovation. Look for lenders that offer competitive interest rates and flexible repayment options. Ujjivan Small Finance Bank offers Home Improvement Loan up to ₹25 lakh at competitive interest rates and flexible repayment tenures up to 15 years.
4. Calculate Your EMIs
Before finalising your loan, it's crucial to calculate your Equated Monthly Instalments (EMIs) to ensure that you can comfortably repay the borrowed amount. Use an online home loan EMI calculator to determine the monthly instalment amount based on the principal amount, interest rate, and tenure.
Example: Let's say you want to renovate your kitchen and estimate the cost to be ₹5 lakhs. You decide to apply for a top-up loan on your existing home loan with an interest rate of 8.75% per annum for a tenure of 5 years.
Using an online EMI calculator, we determine that the monthly EMI for this loan would be approximately ₹10,319. This calculation helps you plan your monthly budget to accommodate the additional loan repayment.
How to Finance Your Home Improvement Projects
Once you have secured the funds using your home loan, it's time to plan and execute your home improvement projects. Here are some tips to effectively manage renovation financing:
- Create a Detailed Plan: Before starting any renovations, create a detailed plan outlining the scope of work, materials required, and estimated costs. This will help you stay organised and avoid any unexpected expenses.
- Get Multiple Quotes: When hiring contractors or purchasing materials, it's essential to get multiple quotes. This allows you to compare prices and choose the most cost-effective options without compromising on quality.
- Prioritise Essential Renovations: If you have a limited budget, prioritise essential renovations that add value to your home. Focus on projects that improve functionality, energy efficiency, and curb appeal.
- Consider DIY Options: If you're skilled in home repairs and renovations, consider tackling some projects yourself to save you money on labour costs.
- Monitor Expenses: Throughout the renovation process, closely monitor your expenses to ensure they align with your budget.
Final Thoughts
Renovating your home is an exciting journey that requires careful planning and financial management. By utilising your home loan effectively for home improvement projects, you can bring your dream home to life.
Buying a house has never been this easy! Avail Ujjivan SFB’s wide range of affordable home loan products and enjoy a hassle-free loan journey. From house purchase loan to plot loans and home improvement loans, we have it all! Alternatively, you can browse through Ujjivan SFB product suite - our wide range of financial products are designed to make your financial life better.
FAQs
1. Can I avail a home loan for renovation if my existing home loan is from another bank?
Yes, you can apply for a home improvement loan with Ujjivan to renovate your house.
2. Is it necessary to provide collateral for a home loan top-up?
No, since the top-up is an extension of your existing home loan, there is no need for additional collateral.
3. Can I include the cost of furnishings and appliances in my renovation loan?
Yes, you can include the cost of furnishings and appliances in your renovation loan amount.
4. What documents are required to apply for a renovation loan?
The documents required may vary depending on the lender, but generally include proof of identity, address proof, income documents, and property-related documents.
5. Can I prepay my renovation loan before the end of the tenure?
Many lenders allow prepayment of loans, but it's essential to check the terms and conditions of your loan agreement.
6. How long does it take to complete a typical home renovation project?
The time taken to complete a home renovation project can range from a few weeks to several months.
7. Are there any tax benefits associated with a home loan for renovation?
Yes, you may be eligible for tax benefits under Section 24(b) and Section 80C of the Income Tax Act.
8. Can I get a home improvement loan with bad credit?
It may be challenging to get a home improvement loan with bad credit. However, you can consider improving your credit score before applying for a loan.
9. What happens if I am unable to repay the home loan EMI?
If you are unable to repay the home loan EMI, it may lead to penalties and a negative impact on your credit score.
10. Can I take a home improvement loan if I live in a rented house?
Home improvement loans are generally available for property owners.
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