Home Loan for House Extension

Home Extension Loan

Check details about home extension loan

✓ Home Loan from ₹5 Lakhs To ₹5 Cr ✓ Multiple Lending Partners ✓ Attractive Interest Rates

Home extension is one of the best alternatives to buying a new home. Many people consider extending their existing home rather than buying a new home, which needs a significant amount of money.

When the family grows, there is a need for more space. At that time, you can either consider moving to a new location by buying a new house, or if you don’t want to leave your locality or your existing home, then an extension seems to be the best idea. So, when you need to extend your house to a bigger and more accommodating space to match your large family's needs, then you must know about a home loan for the extension of house.

Home extension loan provides you with a chance to fulfil your dream of owning a bigger house. Many people have the requisite space in the home but due to the lack of funds, they are not able to convert their dream into reality. But to ensure that your family remains comfortable, the lenders provide home extension loans at attractive interest rates. Due to the low-interest rates, it is assured that things are strictly under your budget, and you don’t have to dig a hole in your pocket.

Here, we will know all about home extension loan, its interest rates by several lenders, eligibility criteria, documents needed, and more to ensure that you have a hassle-free home extension loan process.

Features of Home Extension Loan

Below mentioned are the features which a borrower can consider while availing home extension loan:

1. Home Extension Loan Interest Rate

Various Banks and Non-Banking Financial Corporations NBFCs along with Housing Finance Corporations HFCs provide home extension loans to the applicants. Consumers who want to add more space to their existing homes can apply for home extension loans. Home extension loans are offered to both the existing homeowners as well as new customers.

The lenders can allow the borrowers to avail home loan through a traditional product or as a separate product under the home loan category. Home extension loans are offered at different interest rates by different lenders. These loans start from an interest of around 7.50% p.a., and the tenures allowed ranging up to 30 years.

Most lenders offer home loans for the extension of house at floating interest rates. The interest rate of the home extension loan also depends on the factors such as the credit score of the applicant, their monthly income, their occupation, their profile, and loan principal amount. A home extension loan is offered at the same interest rates as it is in the case of regular home loans.

Here are the interest rates of home extension loans as compared to the regular home loan interest rate by different banks.

Provider Name

Interest Rate of Home Extension Loan

Interest Rate of regular Home Loan

HDFC

7.55% to 8.65%

7.55% to 9.10%

PNB Housing Finance

7.50% to 16.75%

7.50% to 16.75%

LIC Housing Finance

7.50% to 8.75%

7.50% to 9.00%

Tata Capital

More than 8.50% 

More than 7.75% 

Home First Finance Company

8.00% to 18.00%

8.00% to 18.00%

Interest rates mentioned in the above table can vary from one lending partner to the other and are subject to change

 

Here are the interest rates for the lenders providing regular Home Loans for extending the home. 

Provider Name

Interest Rate (p.a.)

SBI

7.55% to 8.55%

Axis Bank

7.60% to 12.50%

ICICI Bank

7.60% to 8.45%

Indian Bank

7.40% to 8.45%

Bank of Baroda

7.45% to 9.20%

Union Bank of India

7.40% to 9.35%

L&T Finance

7.20% to 8.20%

Bajaj Housing Finance

7.10% p.a. onwards

Interest rates can vary as per the financial institution’s policies

2. Loan-To-Value Ratio

Loan-To-Value Ratio or the LTV Ratio of home extension loans means the total part of the home’s value that a lender can offer to fund via the loan. The LTV ratio is set per the RBI's regulatory caps in the home extension loans.

Here is the exact breakup of the loan amount in the case of a home extension loan and the LTV ratios: 

Loan Amount

LTV Ratio

For the loan amount less than Rs. 30 Lakhs

Around 90% of the projected construction cost

The range between Rs. 30 Lakhs and Rs. 75 Lakhs

Around 80% of the projected construction cost

More than Rs. 75 Lakhs

Around 75% of the projected construction cost

LTV is also based on the credit risk assessment, which is conducted by lenders. The same determines the final LTV ratio for a particular applicant who has applied for a loan for house extension. The factors that are taken into account for the credit risk assessment are the credit profile of the loan applicant, the ability to repay, the market value of the home, and more.

3. Tenure of the Home Extension Loan

It is also essential to know about the tenure of the home extension loan. Most banks and NBFCs, along with HFCs, offer home extension loans for a tenure going up to 30 years. These lenders consider a few factors, such as the applicant’s repayment capacity, etc., while deciding their loan tenure. The loan applicants need to determine their monthly EMI contribution as per their net monthly income.

4. Balance Transfer

The loan borrowers can also consider using the option of a balance transfer facility. As per this, the borrowers can transfer their remaining home extension loan to a different lender if the latter offers a lower interest rate. So, a balance transfer facility can lower the overall loan amount of the borrower and save the interest cost. The new lender will also run the credit risk assessment of the applicant as per their rules and policies before finalising the balance transfer request.

5. Charges: Processing Fees, Prepayment Charges

The lenders also charge a processing fee from the new customer as well as the existing borrower who takes up the home extension loan. The processing fees for a home extension loan are around 3% of the loan amount. As per RBI, some rules and guidelines do not allow lenders to charge a prepayment fee on floating interest rate loans. But in the case of fixed-rate loans, the lenders can levy a charge or waive the prepayment fee.

Eligibility Criteria for Availing Home Extension Loan

Before you apply for the loan for a house extension, you must check the eligibility guidelines to determine whether you can get the loan. Here are the eligibility criteria in the case of a home extension Loan:

  • Indian citizen: Only resident Indians can apply for a home extension loan. However, some banks and NBFCs, and HFCs provide home extension loans to NRIs as well.

  • New borrowers and existing borrowers: The lenders offer Home Extension Loans to the loan applicants as well as the existing borrowers who are availing of the balance transfer facility.

  • Age: The applicants must be aged more than 18 years to avail of the loan. The lenders also mention in their eligibility criterion list that they need the borrowers to be not more than 70 years old when they completely repay the home extension loan.

  • Salaried and self-employed: Both salaried and self-employed individuals can apply for this home loan. Also, business owners are eligible to apply for a home extension loan.

  • Existing borrowers: Existing borrowers can add one or more co-borrowers. This will allow them to choose a higher loan tenure and provide an extra source of income. This will improve their eligibility for the loan too.

  • Credit score: The lenders provide a home extension loan to applicants with good credit scores. A credit score of more than 750 is considered good for the loan. If you have a higher credit score, then you will be eligible to get a home extension loan at low-interest rates.

Some lenders also consider other factors such as the applicant’s monthly income, assets, liabilities, work experience, business status, and more as a part of their eligibility criterion. You can also calculate the regular home loan eligibility with our home loan eligibility calculator.

Documents Needed for Home Extension Loan

Here is the list of documents needed for a loan for a house extension.

  • Income proof

  • ID proof

  • Address proof

  • Age proof

  • Proof of employment or business

  • Home extension documents

  • Estimated cost quotation

  • Correctly filled application form

Check the list of home loan documents for different types of borrowers for a regular home loan.

FAQs on Home Extension Loan

  • ✔️What is a loan extension?

    Sometimes a borrower is not able to pay the loan dues on time. This is when the loan extension facility can help the loan borrower. The borrower can restructure the loan payment schedule and pay the loan as per the new extended due date. The loan extension is carried out based on the type of loan and the needs of the borrower.

  • ✔️What is a loan extension fee?

    The loan borrowers may need to pay the loan extension fee if they extend their loan. The exact charges vary with the bank or NBFC or HFC.

  • ✔️What is a loan extension agreement?

    A loan extension agreement is an agreement that is done between the lender and the loan borrower. The document contains the details of the extended loan containing the original and new maturity date of the loan, details about the lender as well as the borrower, original loan terms, new terms such as new payment schedule, new interest rate, etc.

  • ✔️Does loan extension hurt your credit?

    Taking a Loan Extension does not always hurt the credit score directly. Though it may have an impact on your finances, such as interest rates and more.

  • ✔️Can we get a loan for a house extension?

    Yes, there is a home extension loan available for those who want to extend the space of their homes.