Express news service

NEW DELHI: Simmi (name changed) bought her property two years ago, which she rented out while staying in a rented house in West Delhi. But Covid came and with the pay cut it was not financially viable. So she decided to move to her own apartment in Indirapuram, but wanted to customize it according to her needs.

Close observation has suggested that it requires waterproofing, painting, the kitchen needs to be redone, and electrical wiring needs to be replaced. After getting an estimate the cost came to around Rs 7-8 lakh. But how to finance it was the real question and a challenge for her, as she was already paying EMI of Rs 38,000 crore per month.

Friends suggested that he opt for the complementary loan, along with his banker the State Bank of India. “I applied for the loan, but it was more difficult than applying for a home loan. Despite no default in the past two months, and after filling out several documents, it took me a month and a half to get my house appraised, which the bank said was appraised at a lower price, therefore my eligibility for the loan will be lower. Despite proof of all online payments made to the interior design company, they asked the registered architect to give an estimate on their notepad, which the company refused as they claimed everything was digital. They give a statement by email from their registered mail. My savings were depleted and I was in financial shambles, ”Simmi added.

After being harassed, they applied to HDFC Bank, only to repeat the same process and go through the same struggle with another runner who said she could only get a loan when the Ghaziabad Development Authority gave the green light. That means two more months and no other option than a personal loan, at 12% monthly interest.

As working from home keeps more and more people at home, enticing them to opt for home renovations, it is essential to plan ahead, from the amount of renovation needed to deciding how much to pay and, above all, how to finance it.

Stick to your plan
“Most of the time people start by redoing a game and then they end up doing the whole house. It is therefore essential to decide what needs to be done, how much they are willing to spend, and then stick to the plan. Once they stick to it, funding instruments can be decided on the basis of cost. Also keep an upward margin of 10%, ”said Sejal Shah, a Mumbai-based personal finance expert.

However, she advises against taking it out on a small savings or opting for a personal loan. “I never advise any of my clients to opt for a personal loan if the budget exceeds Rs 5 lakh, especially for the salaried class with an annual income below Rs 15 lakh. They can only opt for a personal loan if they have a higher salary and their overall EMI charge remains below Rs 40,000 per month. It is a conservative but cautious way, ”added Shah.

Recharge Vs Renovation Credit
“The complementary loan is a very good option because the interest rates are close to your mortgage and you can sync it with your IMEs, but then you have to keep in mind a delay of at least two months before you to throw. The mortgage must be 24 months old without any default. Whatever they claim initially, from asking for an appraisal of the property to the final repayment of the money, it takes at least two months, depending on your bank, ”said Sanjay Goyal, a senior banker at ICICI Bank.

The home improvement loan is also an option, but one of the problems is getting the bills. As the construction market is still largely unorganized and prefers cash, getting a proper invoice from mason to carpenter is practically a challenge. Even if some of them agree to pay the bill, they will ask you 18% more and thus upset your entire budget. You can still go, if they hire a licensed architect, who can agree to produce all the invoices to the satisfaction of their bank.

Complementary loan versus personal loan

You can benefit from the tax advantage in the event of an additional loan, with certain endorsements. However, there is a cap for this.

There is a huge difference in the interest rate for the complementary loan and the personal loan. For example, if your home loan is at 6.70%, the top-up loan will be 7%, while the personal loan will vary between 11.5% and 12.5%.

A top-up loan is available to existing home loan customers, while a personal loan can be used by anyone.

Complementary loans have flexible terms compared to personal loans. Most of the time, the remaining term of an existing loan is defined as the term of the top-up loan.

How to apply for a complementary loan

You must go to the same lender for the complementary loan, which has your home loan account. You shouldn’t have any flaws.

You give them all the documents, including ownership papers, permission from the relevant development authority, and the cost estimate. Once it is processed, your property will be reassessed and the top-up loan amount of up to 30% of the existing disbursed loan can be used.