Home Loan Top Up: Benefits, Repayment & Maximum Limit

Building and setting up a home requires a lot of money, effort and time. Sometimes, you may need more funds than your initial Home Loan amount. This could be because of an increase in raw material costs, changes to the construction plan or a rise in labour costs.In such situations, you might need to borrow more money. However, a completely new loan can take time and be expensive. This is where a Home Loan Top-Up can be useful. This article explores the meaning of Home Loan Top-Ups, the maximum top-up amount you can get, the benefits, and repayment options.

If you have already taken a Home Loan, you can increase the amount lent to you by taking a Home Loan Top-Up . Typically, the interest rates on other forms of finance solutions, such as Credit Cards, Personal Loans and bank overdrafts, are higher than Home Loan Top-Ups, which makes top-ups a great way to bridge any financial gaps you may have when setting up your new home.A major benefit of a Home Loan Top-Up is that there is no restriction on how you use the funds.

You can get a Home Loan Top-Up if you have been repaying your Home Loan regularly. The other criteria, such as income and age, are similar to the eligibility criteria for Home Loans. This includes

• Age: Between 21 and 65 years
• Profession: Self-employed and salaried
• Nationality: Resident Indian or NRI

The maximum amount available for a Home Loan Top-Up depends on the market value of the property and the outstanding payment of your loan. Usually, the maximum top-up you can avail of is 70% of the outstanding Home Loan amount. Top-Up Loans are among several different financing options that you can consider for additional funds.

Home Loan Top-Ups are processed in a shorter period than most loans since the lender already knows about the property, has verified your documents and is aware of your credit history. This makes it easier to sanction a loan and disburse it.

When applying for a Home Loan Top-Up, you may not have to submit any additional documents as the lender would already have access to verified information regarding the property, legal documents and your income.However, this can vary from one lender to the next. The basic documents you may need for a top-up loan include

• Identity proof (PAN card, Aadhaar card, passport, Voter ID, etc.)
• Address proof (utility bills, rental agreement, passport, etc.)
• Bank statements/ salary slips for the prevous three months
• Passport size photographs

Also Read: The Benefits For First-Time Home Buyers

Easy-to-clear eligibility requirements

The eligibility requirements for these additional funds are fairly relaxed. If you have taken a Home Loan and have made payments regularly, getting a Home Loan Top-Up is relatively simple.The age criteria for Home Loan Top-Ups are similar to that of Home Loans. Also, since your lender already has the necessary information from your original application, getting a top-up on your existing Home Loan becomes easy.

Low-interest rates

Although you can get a Personal Loan or pay for unplanned construction expenses using Credit Cards, repaying this debt can be quite expensive later. Interest rates on Personal Loans and Credit Card bills are usually quite high, and borrowing large sums can lead to extensive debt.On the other hand, interest rates on Home Loan Top-Ups are comparable to the interest rates on the original Home Loan. This can potentially save you from high-interest rates.

Easy processing

When applying for a new loan, you must fill out a new application form before the funds are disbursed to your account. You cannot skip this process, as your lender will have to consider all the factors and verify certain details before approving the loan. However, Home Loan Top-Ups are processed faster without putting a lot of strain on you.This is because your Home Loan lender has already reviewed your credit history and verified your income, the legality of the property documents and the property’s value.

No restrictions on the use of top-ups

Another significant benefit of Top-Up Loans is that you can use them for any purpose. While there are no restrictions on how you use the loan, some lenders may ask you to write a letter stating the purpose of borrowing.Top-Up Loans can be used to extend the house, repair the property or for interior decor, and other personal purposes, such as children’s education, urgent travel, etc.

Tax benefits

The interest you pay on Home Loans makes you eligible for tax deductions. If you have taken the Home Loan jointly, each borrower can claim tax deductions of up to ₹2 lakhs on the Home Loan interest component.Similarly, you can claim tax deductions on Home Loan Top-Ups as well. However, to claim tax deductions, the Home Loan Top-Up must solely be used for the house’s construction, renovation, extension or repair.

Interest is limited to the used amount

Top-Up Loans work much like an overdraft facility. That means while you may be eligible for a certain amount, you do not have to avail of that entire amount. So, you pay interest only on the amount you obtain.For example, let’s say that the amount available to you is ₹4 lakhs, but you only avail of ₹2 lakhs. In this case, you pay interest only on ₹2 lakhs.Also Read: Home Loan Status: How to Check Home Loan Application Status

The tenure of your Home Loan Top-Up can not exceed the tenure of your Home Loan. For example, if your Home Loan has a tenure of 15 years, the Top-Up Loan repayment period cannot exceed those 15 years.When you take a top-up on your Home Loan, your EMIs are recalculated. The lender considers various factors, including the tenures of your existing Home Loan and the top-up, along with the outstanding Home Loan and the top-up you have taken.If you transfer your loan to a new lender, the new EMI amount will depend on whether you extend the duration of the loan or not. However, this has to be approved by the new lender.

• Home Loan Top-Ups are a convenient way to get credit because of the easy eligibility requirements and low-interest rates. As long as you have not delayed EMIs of the original Home Loan, getting a top-up should be easy.
• There are no restrictions on how you use your Home Loan Top-Up. However, if you want to claim tax benefits on the top-up, remember that you can only use it for home renovations or expansions.