When borrowing a home project, it may be difficult to determine whether to borrow a home construction loan or a home improvement loan. Both are separate loans that have separate purposes, and their different knowledge helps borrowers make the right choice. Whether one wants to improve an old home or construct a new one, the right source of financing must be chosen with caution. Grihum Housing Finance offers specific loan products for different housing needs, which enable home ownership and home improvement.
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What is a Home Improvement Loan?
A home improvement loan is for individuals who are homeowners and require money to enhance, renovate, or modernize their homes. It ensures funding of developments that enhance the beauty, functionality, or value of a house. Home improvement loan is used for some of the following:
- Interior and Exterior Repairs: Painting, flooring, roofing, and facade work.
- Structural Repair: Repair of broken walls, ceilings, or plumbing lines.
- Energy Efficiency Upgrades: Solar panel installation, insulation, or energy-efficient window installation.
- Expansion of Living Space: Room expansion, balcony extension, or the addition of extra floors.
What is a Home Construction Loan?
A home construction loan is literally for an individual who is going to build a house from the ground up. Unlike regular home loans that finance ready-built houses, the home building loan finances land development, construction material, and labour. The main features of a home building loan are:
- Stages of Funding: The loan is disbursed in phases based on the construction rate.
- Short Tenure Term: Construction loans are to be repaid in shorter tenures than regular mortgages.
- Individualized Loan Amounts: The amount authorized varies with the approximated cost of construction and the borrower’s repayment capacity.
Key Differences Between Home Improvement and Home Construction Loans
Knowledge about the fundamental variations between the two types of loans will help borrowers in making the right decision in lending.
| Feature | Home Improvement Loan | Home Construction Loan |
| Purpose | Renovation, repairs, and upgrades | Building a new home from scratch |
| Loan Amount | Based on renovation cost | Based on estimated construction cost |
| Disbursement Mode | Lump sum or Multiple tranches | Released in stages as construction progresses |
| Repayment Tenure | Typically longer | Generally shorter |
| Collateral Requirement | May or may not require collateral | Often requires land as collateral |
| Loan Processing | Faster processing | Involves property valuation and documentation |
Which Loan Should You Choose?
The choice between a home improvement loan and a home construction loan is based on the nature of your housing project.
1. Opt for a Home Improvement Loan if
- You want to renovate your existing house.
- The renovation cost is average and requires instant money.
- You prefer flexible repayment plans.
2. Opt for a Home Construction Loan if
- You are building a home from scratch.
- Your development requires phased funding.
- You own land and need construction finance.
Eligibility and Application Procedure
Both loans have periodical eligibility checks but there are some differences in terms:
1. Eligibility for Home Improvement Loan
- Have current residential property.
- Have a stable income source.
- Have a good credit record to obtain improved terms on the loan.
2. Eligibility for Home Construction Loan
- Have property or rights to build.
- Submit an approved construction plan.
- Satisfy the financial and credit standards of the lender.
Why Choose Grihum Housing Finance
Grihum Housing Finance is involved in providing home improvement loans and home construction loans with human-centric terms. Benefits are:
- Flexible Loan Schemes: Project-based finance schemes that are customized according to needs.
- Competitive Interest Rates: Minimum rate of interest to make easy repayment possible.
- Less Documentation: Simple application to ensure quick approvals.
- Expert Guidance: Personal guidance to help borrowers choose the right type of loan.
Conclusion
Home Construction loans and home renovation loans are offered for various purposes, and an appropriate one to be chosen depends on the needs of the borrowers. Home renovation loans are apt in case of remodelling and refreshing, but home building loans are apt if a person desires to build a new house. Customized loan facilities are offered by Grihum Housing Finance and are financed without any inconvenience to homeowners as well as prospective builders. With an understanding of the main variations and eligibility terms, the borrowers can make the correct choice and achieve homeownership without any stress.
