Home Extension Loan is to meet the increasing need for space in the existing house and to facilitate the expansion of your existing house. Through this loan, you can do the work of renovation, repair, or upgrade the existing design of the house.

If you feel that the house you are living in is now getting small and you want to get a new floor or extra room built in it and for this, you want to take a loan from the bank? In such a situation, you will have to apply for a Home Extension Loan. This loan is to meet the increasing need for space in the existing house and to facilitate the expansion of your existing house. Through this loan, you can do the work of renovation, repair, or upgrade the existing design of the house.

Features of Home Extension Loan

If you apply for a home extension loan, the bank disburses the loan amount with minimum documentation by keeping your existing house as security. If you wish, you can also take a home extension loan from the same lender from whom you took the home loan or choose another lender as per your convenience. There is also a fixed tenure for repaying the home extension loan. In this tenure, the borrower has to repay the loan by paying EMI every month. As a loan, you can get 75% to 90% of the estimated amount for construction.

What is the maximum tenure in which it has to be repaid?

You are given a maximum time of 30 years to repay the home loan, but the maximum period for repaying the home extension loan is 20 years. Your eligibility depends on the loan period, your profile, your age at loan maturity, age of the property at loan maturity, etc. In this too, you get the option of taking single and joint loan.

Option of loan at adjustable and fixed interest rates

The interest rates of home extension loan are mostly similar to home loan, yet it depends on the lender. In this too, you get the facility of taking loan at adjustable and fixed interest rates. Adjustable interest rates keep changing at regular intervals according to the prevailing rates in the financial markets. On the other hand, if you take a loan at fixed rate, the interest rates remain the same throughout the tenure. You can take this loan at fixed rate for 2, 3 or 10 years. After the fixed rate period ends, the loan will automatically reset according to the adjustable rate.

Which documents are required while applying

While taking a home extension loan, you have to fill the application form. Along with this, ID and address proof, income proof, employment proof, 6 months bank statement, applicant's photo, property title deed and encumbrance certificate, copy of approved plans, estimate of construction cost, cheque for processing fee etc. are required.

Does tax benefit also apply in this?

Tax benefit is also available on home extension loan. These tax benefits are similar to home loan. Under section 80C, a deduction of up to ₹1.5 lakh per annum can be availed on repayment of principal of home extension loan. Under section 24, if the house is used for self-residence, a deduction of up to ₹2 lakh per annum can be availed on interest payment, whereas if the house is rented out, deduction can be availed without any limit on interest payment.

(Disclaimer- The information in the article has been taken from HDFC's blog)