If you are an existing home loan customer, banks, housing finance companies and non-banking financial companies can offer you a top-up loan, over and above your current loan.
What is a Home Loan Top Up?
Home loan top up is the additional loan for personal expenditures that existing home loan borrowers can get from their lender. Of course, the interest rate for a top up loan is higher than the one a borrower may have been charged for a home loan, but it is usually lower than the personal loan rates.
Who Can get It?
As the word top-up indicates, the top-up loan is strictly for those who are existing home loan customers. Additionally, home loan top up eligibility also counts on age factor. Loans are available to borrowers up to 70 years of age at the time of maturity. Applicant should not have more than one EMI bounce.
Why should you go for a Top-Up Loan?
When you need money quickly and without hassles, a top-up loan is the answer. It is like a personal loan that you can use for any purpose but unlike a personal loan, it is cheaper and can have long tenure and low interest rate. People opt for a top-up loan when they need money urgently like to buy extra space for parking or gardening or for interior of home and other personal expenses. Top up loan saves a lot of paper work that is required when applying for a fresh loan as it will require authentication of documents, fulfilment of eligibility criteria and proving your repayment capacity. Although you are required to submit certain documents even for the top-up loan, the process is not that complicated.
How much can I Borrow?
The value of the loan is determined by your home loan outstanding plus the market price of the collateral pledged by you. Considerably, the new top up loan amount and your existing home loan amount should not exceed 70% to 80% of the property value.
Besides, like in other loans, your credit score, income, age and capacity to repay will determine the amount you can borrow.
Features of Housing Loan Top
Only the existing home loan customers can avail of the facility. Following are the features:
1. Longer Tenure:
The tenure of the top-up loan is linked to the tenure of the original home loan and differs from bank to bank. But, usually, like home loans, top-ups have longer tenures – and may even extend up to 20 years.
2. Hassle-free Process:
Applying for a home loan top-up is quite simple and does not require much documentation, simply because you are borrowing on the basis of your existing home loan.
3. Low Interest Rates:
Top up home loan interest rate is usually slightly higher than the ones for home loans. Like in other loans, the top up home loan interest rates vary by lender and also depend on the borrower’s credit credentials and other factors such as age, income, tenure of the loan and the amount you want to borrow.
Here is everything you need to know about lowering rate of interest on loan.
Spend The Way You Want
Like a personal loan, you can use the money for whatever you want to spend on. It can used for personal expenses or investing in a business, home interior works, buying extra land, education and many others.
Home Loan Top Up Tax Benefit
You are eligible for tax benefits under Section 24 of the Income Tax Act, but only if you used the top-up loan for a house extension, repair or renovation.
Privilege To Choose Another Lender
You can take a top-up loan from your existing lender or apply with another lender for a balance transfer to avail of the better terms.
Documents Required For Home Loan Top Up
Although the process of applying for a top-up loan is quite simple and straightforward, you still need certain documents as proof of your identity, income, age, employment status and history and credit credentials.
End Note
Home loan top up is the best option to meet your financial needs as it requires a lot less of documentation and has other benefits like less interest rate, quickly available and benefits in tax.
To know more about home different types of loans click the link below:
10 Types of Home Loan available in India | You Need To Know!
Author Bio
Devendra Bhandari