Buying a home and maintaining it requires regular expenditure. After a few years, you might choose to undertake a major renovation to accommodate your growing needs. If you have taken a Home Loan which is still in force and you need additional funds for renovations, then taking a Home Top Up Loan is the best option.
What is a Top Up Loan?
A Home Loan Top Up is available to existing Home Loan borrowers. This loan can be availed over and above your existing Home Loan. The best part about them is that you are free to use these funds as you need.
You can use them for refurbishing your home or pay for other living expenses. The lender has no say in how the disbursed funds are to be utilized. Now that you have a basic idea of a Top Up Loan, let’s take a look at the conditions you need to meet to get one.
Conditions for Availing a Home Top Up Loan
- The Top Up Loan can only be taken from the same lender who gave you your Home Loan.
- The tenure of a home Top Up Loan cannot exceed the outstanding tenure of the existing Home Loan. For eg. if your current Home Loan will be fully paid off in 5 years, the tenure of your Top Up Loan is a maximum of 5 years.
- The amount that you can avail through a home Top Up Loan is between 70% to 75% of the current market value of the home after deducting the cost of the outstanding loan. So, if the current market value of your home is 100 lakhs and the loan outstanding is 50 lakhs, the amount you can take a Top Up Loan is between 20 lakhs to 25 lakhs. You can find out your loan eligibility using a Top Up Loan calculator.
- Further, you can only get a Top Up Home Loan if you have a good repayment track record. While some lenders consider your repayment record for 6 or 12 months, others look at the repayments you have made over a number of years from the date of taking the Home Loan.
If you qualify for a Top Up Loan, then you should consider taking it up because of the range of benefits they provide. The following segment will talk about these benefits and tell you why Top Up Loans can be a good fit for meeting your short-term financial needs.
Benefits of Top Up Home Loans
- One of the main benefits of Top Up Loan offered by such loans is the lower interest rate compared to personal loans. While personal loans can have interest rates as high as 30% per annum, top up Home Loan interest rates hover between 11% and 13%, which will be slightly higher than your Home Loan interest rate.
- The tenure of the Top Up Loan is same as that of your original Home Loan. This longer tenure allows you to schedule repayments through easy EMIs. You can use a Top Up Loan EMI calculator to easily quantify your monthly payments.
- There is no need for providing extra security while availing a home Top Up Loan. The original property on which the Home Loan is taken and your repayment record are good enough to allow you avail the loan.
- Top Up Loans qualify for tax deduction as well. The interest portion on the home Top Up Loan is deductible under section 24 of the Income Tax Act. However, when compared to the interest rate on the original Home Loan, this sum is very small. The deduction on principal is allowed if the Top Up Loan is put to use for repairs, renovations, or additional construction on the property.
- Over and above, Top Up Loans are free-to-use loans. The borrower can put to use these loans for any purpose.
A Top Up Loan is indeed an easy finance source to carry out additions, repairs and renovations to your home. Instead of taking the hassle of getting separate loans from other lenders, you get the loan without any hassles if you ask them for a home Top Up Loan.
You will also enjoy the freedom to use the loan as per requirement, similar to a personal loan, but at a lower interest rate. So, if you’re looking to add on to your existing Home Loan, a home Top Up Loan is the best available source of financing.
Take one today and reap the tax benefits offered by top up Home Loans as well.