Home Extension Loan: Overview, Benefits, and Tips for Approval

As your family and needs grow with time, you would require a much larger space to live comfortably. You might want to add new rooms to your house, such as a home office or a playroom for the kids. Some may even benefit from adding a whole new floor to their home. While such home extension or expansion projects do require significant capital, the amount needed would be much lower than the sum of money you would require to buy a new home. Moreover, several lenders offer home extension loans today, making it relatively simple for homeowners to finance such projects.

What Is a Home Extension Loan?

A home extension loan can be availed to make structural changes to your existing house in order to meet additional space requirements. Whether you want to extend your kitchen, add an extra room to your house, or build a new floor altogether, you can get the necessary financial support through such loans. Home extension loans are designed to cater to homeowners wanting to increase their living space due to lifestyle changes or growing family needs. These are a type of secured loan, as your property would serve as collateral for the loan.

Benefits Of Home Extension Loan

• Flexible Usage: Home extension loans can be used for varied home expansion projects and hence would meet the needs of diverse homeowners. You may use such a loan to add a new floor to a villa, construct an additional room at a bungalow, expand existing areas like the kitchen or living room at an apartment, and so on.

• Affordable Interest Rates: As such loans are secured against your property, many lenders offer them at quite competitive interest rates.

• Longer Tenure: Home extension loans may come with flexible repayment tenures, enabling you to spread the repayment over a longer period of time, and lowering your monthly financial burden. Longer tenures result in more budget-friendly EMIs.

• Improved Property Value: By expanding your home with the help of a loan you not only increase your living space, but can also boost the property’s market value significantly. This would allow you to enjoy a better ROI, in case you sell off the property down the line.

Improve Odds of Home Extension Loan Approval

Knowing the online home loan approval chances is extremely important. You need to take steps that can help improve the odds of getting your loan application approved.

• Budget Accurately: You must carefully consider your requirements and create the budget for the home extension project accordingly. It is prudent to avoid overborrowing and keep the loan amount budget-friendly, in order to increase the odds of loan approval.

• Maintain A Strong Credit Score: The lenders would assess your credit score to determine your creditworthiness. They are more likely to approve your loan application if you have a credit score of 700 or above. To maintain a strong credit score, you need to pay all your credit card bills and existing loan EMIs on time. You must also check your credit report regularly for errors and dispute any discrepancies.

• Reduce Existing Debt: It is better that you pay off any existing high-interest debt and short-term loan before applying for a home extension loan. Lenders would look at your debt-to-income (DTI) ratio prior to approving your loan application. A lower ratio shall indicate that you can comfortably manage new EMI payments.

• Increase Your Down Payment: It is better to pay a larger down payment, if you can afford to do so. A larger down payment reduces the lender’s risk, thereby making your loan application more favourable.

Following the simple tips discussed above can significantly improve the chances of getting your home extension loan application approved.

Author bio: The author is a seasoned financial expert with over two decades of experience in the field of financial planning.  He has worked with several financial institutions over time. He has started a blog of his own recently, where he talks about diverse aspects related to the industry.