Nowadays, when real estate prices are rising, the majority of people decide to take out a home loan in order to buy their dream house. However, it frequently happens that the amount of the loan is insufficient to pay for other expenses like registration fees, home decorations, renovation expenditures, or maintenance costs for the property. Top-up loans are helpful in these circumstances. Banks and other financial institutions provide home loan top-up, a type of financial aid that enables borrowers to get credit in addition to their principal home loan.
What is a home loan top-up?
A borrower may acquire a home loan top-up in addition to their existing home loan for an additional loan amount. Each lender has a different maximum loan amount and duration limit for the top-up loan product. Customers can use a balance transfer to get a top-up loan from their existing lender or another lender.
Benefits of home loan top-up
The interest rates on top-up home loans are mostly the same or just slightly higher than the your current home loan rates. As a result, you may potentially save a lot of money on interest rates with a top-up home loan. This is especially useful for expensive purchases like a new car or home renovations. Particularly if the cost was unanticipated or unexpected. Additionally, top-up home loans typically process loans faster than other types of loans, allowing you to get the money you need right away.
No limitation on end usage
A top-up loan is similar to an unsecured or personal loan in that it does not place limitations on how you can utilize the money. It can be utilized for a variety of things, including work, education, home improvements, travel, and more. Although a personal loan gives a similar level of flexibility, a top-up loan is typically a preferable choice due to its lower interest rates and processing fees.
Flexible repayment option
With a top-up home loan, you often receive repayment terms that are similar to those of your first home loan. Other loans, such as gold or personal loans, do not work like this. The payback period for a top-up home loan is determined by the time left on the original loan. This implies that if you already have a housing loan with a 16-year term, you can also receive a top-up loan with a 16-year term. This is a highly beneficial feature because it allows you to borrow money at a very low-interest rate with a longer repayment period.
Simple eligibility requirements
- You must already have a housing loan with the same lender in order to be eligible for a top-up loan.
- Additionally, your house loan must not be for a sum greater than the sum that qualifies for a top-up loan.
- There won’t be much paperwork you need to provide because the bank already has all the details of your loan.
- Since the age restriction is similar to that of your housing loan, you would obviously qualify.
- You must be conscious that you must have a good track record of repaying the housing loan.
- Make sure you have your most recent credit score on hand because the bank will check it.
Did you know that house loan top-ups are eligible for tax benefits? If a top-up home loan was used only to build, renovate, expand, or fix a residential property, then you can claim tax benefits on it. The highest tax deduction possible if the loan is utilized to buy a self-occupied home is Rs 30,000. If the loan was utilized to purchase a rental property, the deduction has no limit. However, the aggregate total tax deduction of Rs 2 lakh per year provided on the interest component of home loans applies to both of these.
“Overdraft facility” is a recent addition to most home loan arrangements. You only pay interest with this service on the amount you actually utilize. This is comparable to a credit card where interest is only charged on the amount used.
This function enables you to pay back a loan without incurring any penalties. Additionally, it assists you in avoiding any further late fines.
The best type of housing loan offered in India is a top-up loan. It provides borrowers looking for low-cost borrowing for a variety of uses with a wide range of advantages. Additionally, it benefits those who require emergency cash. Top-up home loans can benefit a lot of people due to their low interest rates and simple repayment options.