Read This Simple Guide Before Getting a Top-Up Loan

Housing loan is a positive liability that most individuals happily take up for homeownership. Lending organizations sanction high-value loans with repayment tenors usually ranging from 15 to 20 years. However, if any big-ticket requirement crops up in between, the smartest financial move is to avail a home loan top-up.

HFCs or Housing Finance Companies provide home loan top up which allow individuals to borrow additional credit over and above the existing housing loan. The maximum amount offered depends on different factors and varies from one lender to another.

Here are a few things you must know before availing a home loan top-up.

Understand why a top-up loan is beneficial

Availing a top-up loan is better than fresh credit for several benefits such as –

  • Faster and hassle-free processing.
  • Less documentation.
  • Option to renegotiate the tenor.
  • Needs no additional mortgage.
  • No extra charges, etc.

Diverse utility: Decide where to invest

Unlike housing loans which you can utilize only for the purchase or construction of a property, top-ups come with unrestricted usage. You can use the funds to make bigger purchases, finance a foreign trip, fund a wedding, consolidate debts, renovate a home, address medical emergencies, etc.

Fulfil all your financial needs with a top-up loan easily. However, ensure to have a clear knowledge of the fund’s utility before availing.

Check out the interest rates

Being secured loans, the rate of interest for housing loans is reasonable in the market. Similarly, the top-up loan interest rate is also cheaper compared to other fresh credit like personal loans. It helps you reduce the interest outflow and make financial management easier over time.

Know the tax benefits applicable

The Income Tax Act of India allows borrowers to enjoy tax deductions on a home loan top-up.

  • Under Section 24b, you can claim a deduction of up to Rs.2 lakh on the payable interest per year.
  • Under Section 80C, you are eligible to claim up to Rs.1.5 lakh as a tax deduction on the principal repayment per year.

However, these benefits are applicable only if the residential property is self-occupied and completed within 5 years. You must have the home loan tax exemptions and benefits on your fingertips.

Use the home loan top-up calculator

Almost every leading lender provides a top-up loan calculator which aids in calculating –

  • Eligible top-up loan amount.
  • The total amount saved with the balance transfer facility.

The online tool computes these details instantly based on some essential data like information on a current home loan, total sanctioned credit, existing tenor, interest rate, etc.    

Eligibility for top-up loans

Top-up loans are exclusively for existing customers of a lender. It is mandatory to have a current home loan with the lender to enjoy the benefits. Also, you must maintain a regular payment record for a minimum of 12 months along with a valid mortgage.

Note that if your existing housing loan is not with your preferred lender, you can opt for easy home loan transfer and avail the top-up benefits. Once you meet the eligibility criteria, you can proceed to apply for the top-up loan with the best lender.

Those who do not qualify for pre-approved offers can also apply for a home loan top-up through a convenient online procedure.

How to apply for top-up loans?

  1. Log in to the official website of your preferred lending institution.
  2. Find the online application form and fill up with accurate details.
  3. Submit the few relevant documents and nominal fees.

Weighing its various advantages, it is obvious that a home loan top-up is beneficial compared to new credit. As every lender comes with a different policy, ensure to go through the terms and conditions thoroughly before availing an additional credit.

Also Read: Important Things About The Top-Up Loan And Its Benefits

Priya Bagga