Home Renovation Loan: Rates, Tax and How to Apply
Your home needs work, a new kitchen, a fresh coat, a leaking roof fixed, but the quotes add up faster than your savings. A home renovation loan bridges that gap, and is often cheaper than most people assume. This guide explains how a home renovation loan works, the real interest rates, how it compares with a top-up loan, and how to pick the right route.
What a renovation loan costs
| Feature | Detail (current) |
|---|---|
| Interest rate (secured) | Around 8.5% to 10.5% per year |
| Interest rate (personal-loan type) | 9.99% up to 24% |
| Loan amount | Often up to 100% of the renovation estimate, within 75-90% of property value |
| Tenure | Up to 15 to 20 years |
| Disbursal | Often 24 to 48 hours for eligible applicants |
Rates are from current bank and aggregator data. A secured renovation loan against your property is far cheaper, around 8.5 to 10.5 percent, than an unsecured personal loan, which can run well into the teens. Confirm your exact rate with the lender, since it depends on your credit score and income.
How it works
A home renovation or home improvement loan funds repairs and upgrades to a property you already own, painting, waterproofing, flooring, a modular kitchen, electrical and plumbing work, or structural repairs. Lenders usually fund the renovation estimate, sometimes up to the full amount, as long as it stays within a sensible share of the property value. The loan is typically secured against the property, which keeps the rate low, and disbursal is quick because the lender already values your home.
Renovation loan versus top-up loan
If you already have a home loan, a top-up on that loan is often the simplest and cheapest way to fund renovation, since it needs little extra paperwork and runs at 10 to 12 percent. A dedicated renovation loan suits owners without an existing home loan, or who want a purpose-specific product. Our top-up loan guide covers that route in detail. As a rule: existing home loan, consider a top-up first; no home loan, a secured renovation loan beats a personal loan on rate.
The tax angle
There is a modest tax benefit. Interest paid on a loan taken for renovation or repair of a self-occupied house qualifies for a deduction under the house-property head, subject to the overall cap that also covers your home loan interest. The benefit is smaller than for a home loan used to buy or build, but it is worth claiming. Keep the loan sanction and renovation bills as proof, and check the current limits with a tax advisor.
How to get the best deal
- Prefer a secured renovation loan over an unsecured personal loan to get the 8.5 to 10.5 percent rate rather than the teens.
- Check a top-up first if you have a running home loan, it is usually cheaper and faster.
- Fix your credit score to reach the lower rate slab, our CIBIL score guide shows how.
- Get a realistic estimate from a contractor, since the loan is sized on it.
- Compare the all-in cost, including processing fees, rather than the headline rate alone.
Secured versus unsecured: the rate gap
The single biggest money decision on a renovation loan is secured versus unsecured, and the gap is large. A secured renovation loan, backed by your property, runs around 8.5 to 10.5 percent, similar to a home loan. An unsecured personal loan taken for the same renovation can cost anywhere from about 10 to 24 percent, since the lender has no collateral. On a ₹10 lakh renovation over five years, that difference can be well over a lakh in interest. So unless the amount is very small or you need the money in hours with no property paperwork, the secured route, or a top-up on an existing home loan, almost always wins. Reserve the unsecured personal loan for small, urgent jobs where the convenience is worth the higher rate.
Frequently asked questions
What is the interest rate on a home renovation loan?
Around 8.5 to 10.5 percent for a secured renovation loan, and 9.99 percent up to 24 percent for an unsecured personal loan used for renovation. The secured route is far cheaper.
How much can I borrow for home renovation?
Often up to 100 percent of the renovation estimate, as long as it stays within roughly 75 to 90 percent of the property value. The exact limit depends on the lender and your profile.
What is the tenure of a renovation loan?
Up to 15 to 20 years, which keeps the EMI manageable, though many buyers choose a shorter tenure since renovation amounts are usually smaller than a home loan.
Is a renovation loan or a top-up loan better?
If you have a running home loan, a top-up is usually cheaper and needs little paperwork. Without a home loan, a secured renovation loan beats an unsecured personal loan on rate.
Is there a tax benefit on a renovation loan?
Yes, interest on a loan for renovating a self-occupied house is deductible under the house-property head, within the overall interest cap. Keep the sanction and bills as proof.
Can I get a renovation loan without a home loan?
Yes, a dedicated home improvement loan is available to owners without an existing home loan, secured against the property for a low rate.
A home renovation loan is a cheap, fast way to upgrade your home, around 8.5 to 10.5 percent secured, if you avoid the unsecured-personal-loan trap. Check a top-up first if you have a home loan, size the loan on a real estimate, and claim the tax benefit. Read more finance guides on our blog. Rates are indicative current figures, so confirm with your bank.
