However, you don't need to put your plans on hold till you amass the required funds. Simply walk into a bank and take a home improvement loan.

Home improvement loan Most banks provide home improvement loans to people for renovating their houses. You can take the loan for internal and external repairs, adding a room, painting, roofing, waterproofing, plumbing, flooring, woodwork, etc. The loan can be taken for up to 15 years and the interest rate ranges from 10.5-14%. A few banks also provide a loan for buying furniture.

"Such loans score over personal loans as they are secured and, hence, their rate of interest is 4-5% lower than that of personal loans," says Sumit Bali, executive president, Kotak Mahindra Bank. The lender will finance up to 80% of the renovation, while the balance will have to be paid by you. The final amount that is sanctioned will depend on the sum quoted by a certified architect, your repayment capacity, and the total value of the property.

The bank usually gives the money directly to the contractor, though it may also give it to the borrower if he produces the required receipt and bills.

"To avail of a home improvement loan, you need to furnish documents and bills provided by an architect and your bank account statement for the past six months. Apart from these, a KYC (know your customer) form and property documents are mandatory," says Sonalee Panda, head, marketing, ING Vysya Bank. Some banks will require you to provide a no-objection certificate from your housing society and municipal corporation if you are remodelling the house.

The paperwork will be reduced if you take a home improvement loan from the same bank that has given you the home loans. Some lenders insist on a physical verification of the property before sanctioning the loan, though most are not so stringent about how the loan amount is used and don't come for a property check. The processing fee is usually between 0.5% and 0.75%.

If you prepay the loan, you will have to pay about 2% of the outstanding amount as a prepayment charge. Such a loan can be taken even for a house for which you have already taken a home loan, though the bank will decide how much to give. Arvind Hali, head of retail assets & credit cards group, Dhanlaxmi Bank, explains how this is calculated. "Suppose, you bought a house for Rs 100 and took a loan for Rs 80. After two years, the value of the property appreciated to Rs 115 and your loan liability decreased to Rs 70.