If you are seeking to purchase a house but are lacking sufficient funds, you can avail home loan, which generally comes for a long tenure stretching it to decades even.
During this period if you feel like you need some other funds as well, you can always look for the option of getting a Home Loan Top Up.
A Home Loan Top Up can be availed from the bank or NBFCs wherein you have already ongoing home loan which means it can only be taken from the bank or NBFCs which is already funding you your home loan. Just like your personal loan, it can also be used for any of your professional or personal requirements. The general tenure of a top-up loan is approx. 10 years which could stretch to 15 or 20 years if the loan tenure is high.
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There are multiple advantages of availing a Top Up loan which includes:
- Top Up loan can be utilized anywhere: Although the top up loan is availed over a home loan, but you can use the top-up loan to meet any of your financial requirements, unlike the home loan which is meant only for real estate purchase. The top-up loan can be used for medical emergencies, education, home renovations or even making the down payment for your new car. Hence, it makes it ideal for any person in need of urgent funds.
- Fewer Documentations and quick disbursals: Since your documents are already submitted, therefore, this reduces the documentation needed for the process, and since your verification is already done, so it leads to quick disbursals as well.
- A low rate of interest and no mortgage: If you compare it with personal loans the rate of interest levied here is generally low. Top up loans are helpful if the borrower is not willing to pay off two loan’s EMIs, and also you don’t have to submit any collateral in the form of a mortgage.
- Tax Benefits: Top up loans offer you tax benefits under Sec 24 of Income Tax. Also, if you are availing this loan especially for home renovation, you can fetch tax benefits on both interest and principal amount.
Procedure for Top-up Loan
Banks and NBFCs have their own repayment period post which you can apply for Top-up loan. In some banks, it is 12 months wherein some have six months. Once the time frame is over, you can apply for a top-up loan. You need to submit some documents along with the form which includes:
– Application form duly signed with photographs;
– Residency and KYC documents
– Identity card
– Ongoing home loan papers
– Three months recent receipt of payment of an ongoing loan;
– Income statement
You are eligible to apply for a top-up loan only in the banks where your home loan is already going on and the repayment period is over. The approval of the top up loan depends on the ability of yours to payback. It is evaluated through your last payments and your current salary. If you have no installment defaults and a stable salary, it improves your chance of getting your loan approved quickly.
Important points regarding top-up loan
Always keep a few things in mind before applying for a top-up loan:
Evaluate the charges thoroughly
The top-up loan is just like any other loan and is certain to have some fees tagged to it. Always evaluate the charges like processing fees or late –payment penalties. However, if you are willing to switch to another bank, then always analyze their rate of interest, processing fee and other charges. Always compare between your current lender and the other lenders you are willing to switch and then take a calculative decision.
Analyze your property value timely
The value of real estate is fluctuating, so when you are applying for a top-up loan first evaluate the current value of your house which helps you to get the proper estimation of the loan amount that could be fetched.
Top up loans are not available with all the financial institutions so always analyze this before applying and prefer the lender with this facility.
However, if you need urgent cash and are not willing to pay high interest and want hassle-free processing then prefer Home loan top up.