A home loan top-up loan is an addition to your existing loan taken for construction and renovation purposes. The amount can be used for purchasing furniture, renovation, extension, or construction of your residential property. It is availed by those who have already taken a home loan and are paying installments on time. You can get a home loan top-up offered by all private and nationalized banks to credible borrowers and is a much better choice than a personal loan which often comes with high-interest rates.
Features of an Instant Home Loan Top-Up
1. The sanctioning of a top-up loan is similar to that of a home loan. It is available for up to 20 years or the balance tenure of your existing loan. Thus, if you have a good standing credit score and have been making payments on time, then you’re automatically qualified for a top-up loan.
2. The loan amount for an instant home top-up loan would depend on the applicant’s details, age, income, occupation, bank statements, CIBIL score, and value of the property.
3. If you are an existing borrower and require emergency funds, a top-up loan can act as a personal loan at lower interest rates. The amount disbursed for a top-up loan can be used for different purposes such as home furnishing and home improvements.
4. The interest rates of top-up loans are similar to home loans. Some banks offer interest rates a few points higher in comparison to your home loan; however, it is still quite cheaper than a personal loan. Hence, if you need emergency funds, a top-loan is a better option.
5. Another important aspect of a top-up loan is the amount disbursed. It differs from bank to bank. The margin amount of a bank ranges from 70-85%. Any bank can offer up to an amount not more than 70-85 % value of the property.
Eligibility for a Home Loan Top-Up
1. You should be an existing home loan borrower
2. You should have paid installments regularly without any default
3. Your credit report should be favorable
4. Your residential property as a mortgage should be valid
Leveraging the Benefits of Instant Home Top-Up Loan
1. Lower interest rates – As the home loan interest rates are very low in recent times, you can avail of the benefits by taking a top-up loan currently. If you already have an existing home loan, you can arrange additional funds for home improvement with lower interest rates. It is a much cheaper option in comparison to other types of loans.
2. Longer tenure – Home loans are offered for a longer tenure of up to 20 years. If we compare to a personal loan, gold loan, and loan against property, a top-up loan offers the longest tenure.
3. Credible customer – The benefits of an instant top-up home loan can be obtained only when you are a loyal customer. If you are paying installments regularly without any default, you are automatically eligible for a top-up loan. Your income should also support the eligibility for a top-up loan.
4. Tax benefits – With a top-up loan, you can avail the benefits of a tax deduction if you are using the funds for the renovation and construction of your residential property. You can also avail the tax benefits if you are using it for your children’s education. Such benefits cannot be availed in the case of a personal loan or gold loan.
The maximum tax deduction is available up to ₹30,000 if you are using the funds for a self-occupied home. If you are using the funds for let-out property, there is no limit. Both the cases come under category under the overall tax deduction eligibility of ₹2 lakh per year. The top-up loan eligibility for a tax deduction comes under Section 80 (c ) and 24 (b).
5. Easy process and simple documentation – The process to apply for a top-up home loan is very easy. As you are an existing customer, the process is very short. Simple documents such as your Aadhaar Card, PAN card, income statements, bank statements, credit report, and property papers are verified by the lenders.