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Need Funds For Your Home? Get A Top Up Home Loan

Dec 23, 2022

4 min. Read

Need Funds For Your Home? Get A Top Up Home LoanHome Loan

Need Funds For Your Home? Get A Top Up Home Loan


Top Up Home Loan can be used for various needs. Furniture purchases, construction, additions, renovations, to name a few. Existing home loan customers can access a Top Up Home Loan without providing any additional security or guarantee. In fact, you can claim tax advantages and also enjoy lower Top Up Home Loan interest rates. The repayment terms could be the same as those for a home loan. Even loan processing is convenient and the processing fee does not hurt your pocket as it may not exceed one percent of the loan amount. The approvals, however, may depend on the balance home loan amount you owe or on a fixed sum decided by the bank.


What is a Top Up Home Loan?


A Top Up Home Loan meaning is a loan that banks provide over and above the current home loan to their customers. While some banks have restrictions that the Top Up Home Loan can only be used for residential purposes, there are some banks that don't.


What are the advantages of a Top Up Home Loan?


Top Up Home Loan has various advantages, such as:


• Top Up Home Loan interest rates are lower

•Top Up Home Loan is multipurpose and can be used for various reasons like building costs, renovations, and extensions

• Apart from that, there is no restriction about using it for personal or professional purposes, however, this depends on the bank

• If used only for home construction or renovation, tax benefits are available

• Faster loan processing and loan disbursement

Factors to consider when evaluating a Top Up Home Loan lender


Depending on the bank, a Top Up Home Loan from your current home loan provider may be given to you at a higher or lower interest rate. Compare the Top Up Home Loan interest rate offered by your bank to the current customers with that offered by other banks to new customers to conduct research on this.

While some banks offer existing customers a limited tenure that is significantly shorter than the balance on their home loan tenure, other banks may offer a longer tenure or just the balance of their home loan tenure.

Pick the right bank based on your financial needs as some banks only offer Top Up Home Loans to existing customers up to a certain amount while others don't. No matter which lender you use for your Top Up Home Loan, you can pay it back early without incurring penalties.

Documents Required for a Top Up Home Loan


The paperwork needed for a Top Up Home Loan varies from lender to lender. Typically, the following papers are needed:

• Identity documents such as a passport, voter ID card, driver's license, Aadhaar card, PAN card, etc

• For candidates earning a salary, the previous three months' pay slips are necessary

• Addresses must be verified with documents like a passport, lease, utility bills, etc

• Bank statements for the last three months showing income information

• Passport-sized photographs

Eligibility Requirements


The eligibility criteria for Top Up Home Loans are the same as those for the home loan if you are applying for or have already received a housing loan from the bank. You may also check out the various Top Up Home Loan calculators to select from a range of tenure and interest rate options. From bank to bank, the eligibility requirements might be different. However, the following are some important factors to remember:

• The existing EMIs shouldn’t have bounced. The most that can bounce is one installment

• You must pay off EMI bounces before the next EMI is due (if any)

• When combined with balance transfers from home loans from other banks, Top Up Home Loans require a one-year history of uninterrupted repayment

The following conditions, which may differ from bank to bank, apply to both types of loans:

• A person should be between the ages of 21 and 65

• Top Up Home Loans can be obtained by salaried workers and self-employed individuals

Applying for a Top-Up Home Loan

To apply for a Top Up Home Loan under the Home Loan category, go to the current lender's official website. You can also go in person to the nearest branch office of your current lender. Before selecting the lender to avail of this facility, compare the Top Up Home Loan interest rates and margins offered by various lenders to find the best deal. You can also use various Top Up Home Loan calculators for a quick check on the tenure, eligibility, interest rates and final amount to be paid.


Additionally, in order to avail a Top Up Home Loan from a different lender, you must first submit an application for a home loan balance transfer with the new, preferred lender.

Considerations When Choosing a Top Up Lender


Obtaining a Top Up Home Loan on an existing home loan necessitates precision. The finance provider will assess the Top Up Home Loan application based on the following criteria:

• Loan Amount


A few banks limit the total amount of Top Up Home Loans available to existing customers, whereas others do not. The loan amount is determined after carefully considering many factors such as repayment history, missed EMIs, and so on.

• Interest Rates


When choosing a lender, the Top Up Home Loan interest rate is the most important factor. The newly chosen bank may offer a higher or lower interest rate depending on the existing interest rate.

• Tenure


Many banks offer long terms to existing customers, while others offer terms that are shorter than the existing home loan tenure.

• Foreclosure


Another consideration when selecting a lender is whether or not there is a penalty for early repayment of Top Up Home Loans.

So, whether you need to repair, renovate, or refurbish your home an easy Top Up Home Loan is the way to go.

Benefits of a Top Up Home Loan


When a Top Up Home Loan is availed for building, remodelling, extending, or fixing a residential property, then tax benefits may be claimed. Here are the deductions allowed:

• If the Top Up Home Loan was used to purchase a self-occupied home, the maximum tax deduction allowed is Rs. 30,000

• There is no cap on the deduction when a loan is used for rental property

•However, each of these is covered by the overall total tax deduction of Rs. 2 lakh per year offered on home loan interest

•The principal and interest portion of the Top Up Home Loan will be eligible for a tax deduction if it was used to buy or build a new property, subject to the limits outlined in Sections 80C and 24 (b)

•However, the deduction can only be made for the interest portion of the loan and not for the principal portion in case the home loan top-up is used to renovate, alter, or repair residential property

•In order to claim the tax benefits, it is crucial to keep the receipts and paperwork for all work performed on the residential property using the top-up loan


This article is authored by L&T Finance.

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