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How Home Loan Top-up Work – A Complete Guide

How Home Loan Top-up Work – A Complete Guide

Do you need some additional cash to furnish your new home? So, should you apply for a second loan? Not at all! Instead of a new loan, you can apply for a top-up on your existing housing loan and easily secure the required funds at affordable home loan rates and charges.

Wondering how this facility works for housing loans? Let’s take a look.

How does a housing loan top-up work?

A top-up on your home loan is a convenient and hassle-free way to secure additional funds for various expenses. By opting for a top-up on your existing home loan, you can avail a loan amount that can be used to meet various financial needs. However, the loan amount, combined with your existing housing loan, should not exceed 70-80% of the property’s value.

For example, if you have taken a loan of Rs. 75 lakhs from your lender for ten years, and you need another loan to refurbish your loan within five years, you can get a loan top-up over your current loan to fund the refurbishing expenses.

In fact, you can secure a loan top-up even on a balance transfer housing loan. Here, all you need to do is fill out an application for a loan top-up with your balance transfer application.

The best part? A top-up on your housing loan works similarly to a personal loan. So, you can finance any expense with it.

Additional Read: Which One Should Be Taken – Home Loan Top Up or A Personal Loan?

What are the advantages of a top-up loan on home loan?

A top-up loan on a home loan offers several advantages to help you achieve your homeownership goals. These include:

#1 Long loan tenure

With a top-up loan, you can enjoy a long loan tenure, which provides you with the flexibility to pay off the loan at your own pace, allowing you to build a home you can love and cherish.

Furthermore, you can use the home loan top-up calculator to decide on your desired home loan tenure and the EMIs that easily fit your budget.

#2 Tax benefits

You can avail of tax benefits for home repairs, construction, and even education through a home loan top-up, making it a cost-effective option in the long run.

#3 Debt consolidation

The top-up loan can be used to consolidate high-interest unsecured loans, making it easier to manage your debts.

#4 Fast processing

A top-up loan application and approval process are relatively simple and straightforward. It gives you quick access to funds without having to go through long procedures. Some banks even have a fully digitalized process.

#5 Lower interest rates

A top-up loan comes with relatively lower interest rates, making it a popular choice among homeowners.

The benefits of a top-up loan on a home loan make it an attractive option for those looking to improve their homes or manage their debts.

Who can get it?

To qualify for a home loan top-up, you must fulfill the eligibility criteria specified by your lender. The foremost requirement to be eligible for a top-up on home loan is that you must be an existing customer of your chosen lender. Meaning you must already have taken a loan from that lender.

Additionally, you must also have a history of regular loan repayments with your lender.

Documents required

Loan top-ups require your housing loan documentation along with proof of your loan repayment history. So, if you’re applying for a top-up loan with your current lender, they may already have your records. However, if you’re applying for a top-up on your balance transfer loan, here are some documents you will need.

  • KYC documents
  • Address proof
  • Property papers
  • Bank statements
  • Income proof, etc.

Factors to consider before applying

  • The loan tenure on top-up loans varies between lenders. So, before applying for one, ask your lender about the loan tenure.
  • The interest rate on your top-up loan could be greater than the home loan interest rate. Again, it is a good idea to confirm the rates on these loans with your lender before applying.
  • Lenders can limit the loan corpus they sanction on the top-up loan. Additionally, some lenders may only allocate loans for specific home-related financing. Hence, you must ensure that your lender offers loan top-ups as per your financial requirements. Else, you must seek a new lender.
  • Top-up loans with end-use like home refurbishing, construction, etc., may be eligible for tax benefits.
  • Top-up loan prepayments don’t attract penalties.

Additional Read: Difference Between Balance Transfer Home Loan and Top Up Loan

Conclusion

Now that you know how loan top-ups on housing loans work, it’s time to get a loan. Looking for a lender that fits the bill? Turn to Tata Capital. We offer loans at affordable rates and allow flexible repayments too. Use our home loan top-up calculator to understand your potential EMI liabilities today!

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