Have a home loan? Know how you can get a top-up on it!

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Do you know if you are living in a house and repaying its home loan amount, you can still borrow against it? A top-up home loan on 35 Lakh Home Loan EMI or any amount for that matter- is one of the practical approaches to raising money. Banks and other financial institutions provide top-up home loans to those who are looking for additional help on top of their pre-existing home loan amount to fulfil their goals such as home renovation, buying furniture, etc. It is similar to how you top up your mobile balance when you are running low. Usually, most banks provide the option to top-up your home loan, but if it doesn’t, you can always transfer to a lender that offers this facility. Let’s get to know more about top-up home loans and what else you need to know before applying for one. 


Can anyone apply for a top-up home loan?


One must know that a top-up loan on 35 Lakh Home Loan EMI or any amount for that matter is not available to everyone who has availed of a home loan. There are several factors which a bank and a financial institution look into before they decide to grant a top-up loan. The borrower’s ability to repay existing home loan amounts in timely instalments, credit score, six to twelve months of a clear repayment record, and whether the borrower has other loans running, etc., are some of the deciding factors for a bank. 


Hence, if you are repaying, for example, your 40 Lakh Home Loan EMI on time and need extra finance over and above your existing home loan, the bank will not hesitate to grant you a top-up home loan. Now let’s discuss the important factors: 


Borrowing amount: The amount of money a bank will sanction depends on the number of EMIs already paid by you on your existing loan of 40 Lakh Home Loan EMI or any amount for that matter. The loan to value (LTV) ratio that the bank often uses is between 75 and 80 percent of the value of your home. However, the total amount which the bank disburses varies. For example, Axis Bank customers can avail of a top-up loan to borrow up to Rs. 50 lakh against the mortgage on their property. Sometimes, the lender might approve 10% of the original home loan after 12 EMIs. The borrower can be qualified for 20% of the mortgage after 24 EMIs. With each lender, a different cap applies. Moreover, the loan repayment tenure will be the same as the outstanding home loan tenure. 


Easy to get: Top-up home loan is considerably easier to get than a home loan. It is because the bank already knows your financial and personal details in advance and even has knowledge about your repayment consistency. This makes applying for a top-up home loan on your existing, for example, 35 Lakh Home Loan EMI, simple to apply. The application involves minimal documentation and is usually processed quickly. 


Tenure: Typically, a top-up loan is provided for the remaining term of the pre-existing loan’s 40 Lakh Home Loan EMI outstanding period. This means that the top-up facility will also need to be paid back during the remaining tenor of your home loan policy. Depending on the bank, the loan’s term and tenor can change. For instance, Indian Bank offers a top-up home loan with a maximum term of 10 years, and the State Bank of India offers one with a maximum term of 30 years. Some financial institutions, like the Bank of Baroda, base the loan amount and term on the borrower’s age.


Interest: Your top-up loan facility’s interest rate will probably be a little higher than the rate that was applied to your pre-existing loan of 40 Lakh Home Loan EMI. The top-up loan interest rate is better, nevertheless, when compared to the high-interest rates charged on personal loans. Additionally, interest rates differ based on the borrower’s profile. For instance, Axis Bank’s top-up home loan starts at 8.65 percent. It ranges from 7.50 percent to 9.80 percent for SBI.


Processing fees: Choosing a top-up loan on 40 Lakh Home Loan EMI isn’t free. In actuality, the top-up facility has processing costs, but in some cases, it is seen that the bank may be willing to waive the cost in particular circumstances. Ask your lender in advance if there will be any processing fees for the top-up loan.


Tax Benefits: You can also receive tax savings if you take out a top-up loan to build a room or repair or renovate your property. If a top-up loan on 35 Lakh Home Loan EMI is applied for in order to purchase a home, both the principal and the interest amount are subject to tax deductions under sections 24 and 80C of the Income Tax Act. However, a loan taken for other personal or business needs will not qualify for income tax advantages. But a top-up loan is always a preferable option to meet your financial needs when compared to personal loan interest rates.


Are you going to require additional money to furnish your new house? So, should you apply for a second loan of 35 Lakh Home Loan EMI or any amount as per your need? In no way! Instead of getting a new loan, you can quickly acquire the needed money at low home loan rates by applying for a top-up on your home loan. You’ll need basic KYC and property-related documentation and bank statements, income proof, a high CIBIL score, etc. Availability of a top-up loan is frequently the best option. Even the experts say that taking a top-up loan on an existing home loan is a better option during an emergency as they are available at a good interest rate. While you can take out a personal loan, the conditions may be more expensive, and the documentation might not be as hassle-free as the top-up loan process are.