What is a Home Loan Top Up?

It is normal to take out a loan when one needs money. However, if you already have a house loan, a top-up home loan, which is a loan obtained on top of your current home loan, is frequently the best option. While you can take out a different loan, for example, a personal loan, the conditions may be more expensive, and the application process may take longer. In addition, compared to new loans, the documentation necessary for a top-up home loan is less because the bank or lender already has all your information from your existing home loan.

Many banks provide top-up loans when transferring your home loan to another financial institution. So, what is a top-up loan on a home loan, and how does it work? It’s a loan given to you alongside your current mortgage. You may think of it as a property loan extension, but without the spending constraints that come with a home loan. Consequently, you may utilise it for various reasons while still benefiting from low-interest rates.

Now that you understand what a top-up home loan is, let us learn more about it in detail. 

Introduction to Top-Up Home Loan

Assume you took a home loan worth INR 80 lacs from a lending institution for 20 years. After ten years, let’s say you’re left with an outstanding amount of INR 48 lacs. In such a scenario, you can avail a top-up home loan. 

However, to be eligible for a top-up home loan, you must be a creditworthy borrower who has made on-time EMI payments.

What is the Maximum Amount of a Top-up Home Loan you can Get? 

The total top-up loan’s sum plus the outstanding loan should not surpass 70-80 per cent of the property’s worth, depending on your lender.

Must Read: How to Reduce Your Home Loan Interest Burden (4 Simple Tips)

The Benefits of a Top-up Home Loan

After understanding “what is home loan top-up“, here is a quick rundown of top-up loan benefits.

• You can get up to a high proportion of the property’s market value, i.e., around 70-80 per cent.
• You can plan loan repayment over a longer tenure, which helps reduce monthly EMIs.
• The interest rate on your top-up loan is only a few points more than your existing home loan.
• Top-up loans may be utilised for various objectives, including home improvements such as furniture, gadgets, and more, personal necessities, medical bills, and further education.
• Top Up home loan approval is simple if you already have a property loan and have an excellent payments history. Consequently, disbursals are also quick.

Suppose the money is utilised for acquisition, construction, changes, renovations, and repair. In that case, tax deductions are possible up to the limits of Section 24B and Section 80C. However, there are certain restrictions, so check with your CA.

Documents Required for a Home Loan Top-up

Because you are an established client, you may not need to submit any additional paperwork to acquire a home loan top up because your bank or lender already has documentation such as: 

• KYC
• Address Proof 
• Income Proof 
• Papers of property
• Workplace Proof 
• Account Statements 

However, you may have to share the latest income proof, bank statements, etc., with the financial institution. 

What are the Home Loan Top-Up Eligibility Requirements?

The top-up loan’s qualifying conditions are the same as those for the home loan offered by the bank to whom you are applying or have previously applied for a home loan. It may vary from one bank to another. However, there are a few things to keep in mind:

• There should have been no EMI bounce the previous year.
• If there is an EMI bounce, it should be handled before the next EMI is due.
• LTV should not exceed more than 70-80% of the property value. 
• The lender will also assess the loan repayment track record, including the CIBIL score. 

Must Read: Tips to Apply Home Loan After 45

Bottom Line

For a top-up house loan, you’ll need recent bank statements, income proof, CIBIL score, etc. Before you apply for a home loan, learn about the documents you’ll need. Then, submit them as soon as possible to speed up the approval process.

In the case of a balance transfer and a top-up house loan, you may be needed to produce basic KYC and property-related documentation. So, use a top-up house loan if you need money and take advantage of all its perks now that you know what it is! At PNB Housing, we provide hassle-free disbursal of top-up home loans at a nominal processing fee and attractive rates. Connect with our representatives to learn more.

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