Why Should You Opt For A Top-Up Home Loan? 6 Benefits Listed
Home loans are long term loans that extend up to 30 years. These loans are a great way to get cheap funding to own a home. A home loan also offers other additional benefits to the borrowers. One such facility is the top-up home loan.
A Top-Up Home Loan is a kind of personal loan that is offered on top of your current home loan. A top-up home loan amount could be within the overall limit of your existing home loan, or even over and above it. This limit is decided by the lender based on your repayment history and latest credit score.
A top-up home loan is the easiest way to avail credit for various needs; be it personal, business, or a medical emergency. There is no restriction on how you utilize the funds availed through a top-up home loan. Whether you want to furnish your home, or go on a foreign vacation, or is it an unexpected medical emergency; whatever the purpose, you can avail the funds through a top-up home loan.
#1 Simple Eligibility Criteria
- The basic eligibility to get a top-up home loan is, you need to have a home loan with the same lender.
- You need to also have a home loan amount that is not more than the amount that is available for a top-up loan.
- You won't need to submit a lot of documentation, as the bank already has all the information about your home loan.
- The age limit is similar to your home loan so you would be naturally eligible.
- You need to have a solid repayment history with the home loan; that is something you have to be aware of.
- The bank will check for your latest credit score so ensure that you have it.
#2 Low Interest Rates
The interest rates on top-up home loans are mostly the same, or just slightly higher than your existing home loan interest rates. Therefore, a top-up home loan has the potential to save you a lot of money in terms of interest rates. This is particularly helpful for big ticket expenses like a new car or a house renovation. Especially, if the expense was unplanned or unexpected. Also, the processing time on top-up home loans is usually significantly lower than other loans so you can avail the funds quickly.
#3 No Restrictions On Fund Utilization
Top-up loan is similar to an unsecured or personal loan that doesn’t restrict the purpose for which you can use the funds. It can be used for any purpose like business, education, home renovations, vacations, etc. You may very well go for a personal loan, which offers similar flexibility, but a top-up loan is usually a better option because of the lower interest rates & processing charges.
#4 Flexible Repayment Options
Usually, with a top-up home loan, you get repayment tenures similar to your original home loan. This is not the case with other loans like personal loans or gold loans. With top-up home loan, the repayment tenure is based on the remaining tenure on your original home loan. This means that if you have a home loan tenure of 16 years, you can get the top-up home loan tenure of 16 years too. This is a very good feature as it means that you can avail the funds at a very low interest rate, with a longer repayment tenure.
#5 Tax Benefits
Did you know that you can get tax benefits on top-up home loans? Yes, you can claim tax benefits on a top-up home loan if it was used solely for the construction, renovation, extension, or repair of a residential property. If the loan is used to purchase a self-occupied home, the maximum tax deduction available is Rs 30,000. There is no cap on the deduction if the loan was used to purchase a rental property. Both of these, however, are subject to the overall total tax deduction of Rs 2 lakh per annum available on the interest component of home loans.
#6 Overdraft Facility
A recent feature added to most home loan products is the 'overdraft facility'. With this facility, you pay interest only on the amount you use. This is similar to a credit card where you pay interest only on the amount you use.
This feature helps you to make payments on a home loan without incurring any penalty. It also helps you to avoid any additional late fees.
This way, you can use the home loan funds towards any expense, and repay the outstanding balance when you have money in your account.
Top-up home loan is the best home loan product available in India. It offers a wide range of benefits to borrowers looking to secure low-cost funding for various purposes. It is also advantageous to those who are in need of emergency funds. With its low interest rate and easy repayments, top-up home loans can be beneficial to a large number of people.
FAQs 6 Benefits Of A Top-Up Home Loan
1. What is the interest rate on a top-home loan?
Top-up home loan interest rates are similar to interest rates on your original home loan. It ranges between 6.90% - 7.50%. It is also determined based on your latest credit score and repayment history.
2. What is the repayment term on a top-up home loan?
Top-up home loans get the same repayment term as your original home loan. If you have a 10 years repayment tenure on the home loan, your top-up home loan will be paid back in the same 10 years.
3. What can I use the top-up home loan for?
There is no restriction on how you can use the top-up home loan amount. It can be used for any purpose - for home renovations, medical expenses, vehicle purchase, dream vacation, higher studies, and more.
4. What is the maximum amount that I can avail from a top-up home loan?
The maximum amount of a top-up home loan is determined by the outstanding home loan balance, the market value of the underlying mortgaged property, and the bank's terms and conditions.
5. How is a top-up home loan different from a personal loan?
Top-up home loan is better than a personal loan as it offers you a lower interest rate and more flexibility with repayments. The eligibility conditions are also pretty lenient as the bank already has a collateral in the form of your purchased house.