Home Loans are generally taken to purchase a house, reconstruct, furnish or renovate your home towards your personal expenses. But if your Home Loan isn’t sufficient to meet all the financial requirements of your home, you can apply for a top-up loan over and above your existing loan.
Let’s assume you took a home loan a few years ago and you are currently servicing its EMIs. However, now you find out that you urgently need funds for your daughter’s wedding or your business, or may it be for your home renovation. To complete it, you do not need to avail of another loan; you can get a top-up loan similar to a balance top-up you get on your prepaid mobile connection.
A top-up loan is an extra amount that one gets as a loan, over an existing home loan and these loans are provided by financial institutions when people are in urgent need of cash.
Let us first understand top-up home loan through an example:
A girl named Aditi took a home loan 5 years ago for Rs. 50 lakhs at an interest rate of 9% with a tenure of 20 years. Since then she has paid Rs. 10 lakhs from the principal amount.. Taking a top-up loan on an existing home loan is a better option in such cases as it is easily available at a reasonable interest rate.
Most finance companies offer this facility to their existing customers. You can also get a top-up loan based on your regular payment record along with a good credit score.
Availing a top-up loan from Shubham entails less paperwork and easier processing when compared to a new loan.
Here are some of the aspects you should know if you are planning to take a top-up home loan:
1. To be eligible for a top-up loan, you should have an existing home loan with the bank.
2. The top-up loan can be availed for a variety of purposes, for example, business expansion, education expenses, medical emergencies, weddings, etc.
3. The top-up loan is available for a period of up to 20 years or until the balance tenure of the original home loan. The tenure of a top-up loan depends on the borrower’s profile, income age, and the value of the property.
4. The maximum top-up amount limit varies for financial sectors. Also, the outstanding home loans balance generally does not exceed 70-80 percent of the total value of the property.
5. As compared to personal loans, the interest rate applicable to top-up loans are slightly higher than what you pay for your home loans. This is very cheap compared to the interest rates on the personal loan. This is very cheap compared to the interest rates on the personal loan. However, it is recommended that before taking a top-up loan you should discuss the interest rate with your relationship manager.
6. You can also get tax benefits on your top-up loan if it is used for home renovation, starting a new business, or funding your children’s education.
I hope now you have a clear idea of when to opt for a top-up loan and when you should go for a new loan. At Shubham Housing Development Finance, we provide you with a flexible option to meet your incremental financial needs.