Once a home loan has been made available an additional amount may be needed to meet such house-related requirements.
That is where a Home Loan Top Up facility comes to the assistance of borrowers seeking to meet additional expenditure related to needs such as home improvement / upgrade / purchase or other particular economic demands.
What is Home Loan Top Up?
A home loan top up is an additional loan amount that a borrower can avail over and above the existing home loan. The maximum loan amount and the tenure available under the top up loan product vary from lender to lender. Customers have the flexibility to avail top-up loan from the existing lender or from a different lender through balance transfer.
Features and Benefits of Home Loan Top Up
Mentioned below are some of the features and benefits of Home Loan Top Up:
Longer Tenure: Compared with a personal loan, the amount lent under house loan is easy to repay, with repayment period extending up to 20 years.
Lower Interest Rate: The interest rate offered under home loan is significantly lower than what is offered under a personal loan. Therefore, in case of urgent need of money, it is beneficial to select a home loan to top up. Let's compare the rates for some of the big banks.
| Bank | Home Loan Top Up Interest Rate | Personal Loan Interest Rate |
|---|---|---|
| SBI | 8.60% onwards | 11.50% onwards |
| HDFC Bank | 8.95% onwards | 10.75% onwards |
| ICICI Bank | 8.60% onwards | 11.25% onwards |
| Axis Bank | 8.55% onwards | 12% onwards |
Higher Loan Amount: The financial institution provides the ability to take advantage of a higher loan sum of up to Rs. 50 lakh under home loan upgrades. However, it is important to remember that the balance of the amount of the top-up loan offered and the amount of the unpaid home loan should be well within the limits set out in the bank's policy.
Various Needs: Top-up loans may be used for various purposes, including matrimonial, educational, corporation, home renovation / construction expenses, etc.
Tax Benefit: Home loan top up provides tax benefits of up to Rs. 2 lakh under Section 24(b) of the Income Tax Act,1961. However, customers are eligible to claim tax benefits only if the top up loan is utilized for home renovation or home extension.
Swift Processing: Delivering a home loan top-up requires minimal time because there is no need for extra background checks or paperwork.
Home Loan Top Up Interest Rates
The table below shows the rates and charges levied by the leading banks on Home Loan Top Up.
| Bank | Interest Rate | Processing Fee |
|---|---|---|
| SBI | 8.60% onwards | 0.40% of the loan amount plus applicable GST |
| HDFC Ltd. | 8.95% onwards | 0.50% of the loan amount plus applicable GST |
| ICICI Bank | 8.60% onwards | Up to 0.50% of the loan amount plus applicable GST |
| Axis Bank | 8.55% onwards | Up to 1% of the loan amount plus applicable GST |
| Bank of Baroda | Applicable ROI on linked Home Loan + Strategic Premium + 0.50% | 0.25% of the loan amount |
Eligibility Criteria For Home Loan Top Up
Both current borrowers of home loans are typically eligible for home loans. But there are some important considerations that are taken into consideration when determining the eligibility of a claimant to receive the benefit. They are:
- Should have taken a home loan
- Good track record of regular payments on the existing home loan
- Appropriate age and income of the applicant at the time of application
- Credit report of other loans, if any, should be in favor of the borrower
How to Apply for Home Loan Top Up
To apply for Home Loan Top Up, visit the current lender's official website and apply for a top-loan under the category Home Loan. You can also make use of home loan by physically visiting the current lender's nearest branch office. However, before finalising the lender for this facility, compare the interest rates and margins for various lenders in order to get the best deal and offer.
Also, to avail home loan top up from a different lender, first apply for home loan balance transfer with the new preferred lender.
FAQs
What is the tenure of a top-up loan?
The maximum tenure for a home loan top up might go up to 20 years.
What is the maximum amount available under a top up loan?
The maximum amount offered under a top up loan varies from lender to lender. However, it is important to note that the top up loan amount being offered and the outstanding home loan amount should be well within the limits specified under the bank’s policy.
Can I take a top up loan from another provider instead of my existing home loan provider?
Yes, it is possible to avail a top up loan from another lender, but before availing it, you will have to opt for balance transfer from existing lender to the new lender.