What is a home loan top up?
Top-up loans are grand option for individuals who have already taken a personal loan but need additional funds for any reason whatever. There are numerous benefits of taking a top-up loan, starting with a low rate of interest in comparison with personal loans.
It is mainly allows you to avail a loan amount on top of your home loan. The normal loan tenure is about 10 years and is often offered only after a few years into the home loan disbursal, as this gives a good idea about your repayment track record, which means no default down the line and this also increases your loan eligibility.
Now, in this article we discuss about –
• What is covered under home loan top ups?
• What are the eligibility considerations for top up loan?
• What are the benefits of taking a home loan top up?
• What are the interest rates and processing fee for top up?
• What are the documents required for home loan top up loan application?
• What are the required documents for Income and Employment Proof?
What is covered under home loan top ups?
One can avail top-up for purposes like kid education, vacation, debt repayment, car and personal loan pay off, medical emergencies, vehicle purchase, marriage of your child, home improvements and buying commercial property , etc.
Home Loan top-up is flexible for applicant’s needs and different from home furnishing/interior loans.
What are the eligibility considerations for top up loan?
They are as follow:
1. The customer must have taken a home loan from the bank it approaches for a top-up loan.
2. Top-up loans can only be acquired after 6 to 12 months or after a preset number of years of repayment record so far as the home loan is concerned. Some banks may also have additional conditions with regards to possession or completion of the house prior to sanctioning a top-up loan.
3. The acceptable amount on a top-up loan is 80% to 85% of the property’s current market value. Hence, if the property value is Rs. 60 lacs and Rs. 30 lacs is the amount outstanding on your home loan, the top-up loan amount that can be availed is 15 lacs to 18 lacs.
4. Some banks have a condition where in the outstanding home loan amount and the amount availed through the top-up loan cannot exceed the initial home loan amount availed. In this case, the maximum amount that can be borrowed through a top-up loan is Rs. 5 lacs if the outstanding loan amount is Rs. 35 lacs and the original sanction amount is Rs. 40 lacs.
5. The initial home loan outstanding tenure is usually the tenure of the top-up loan. For example, if there are 10 years remaining on the home loan, the top-up loan’s tenure cannot be more than 10 years.
The terms and conditions of top-up loans are different with different financial institutions. Click here to read about calculate your home loan eligibility.
What are the benefits of taking a home loan top up?
There are some very compelling benefits which make the top up home loan a preferred tool by most of the home loan borrowers.
1. Home loan top-ups offer lesser interest rates than personal loans or mortgage loans.
2. There is no restriction on the consumption of the money the borrower is at liberty to spend it any ways that he wants to make best of the situation.
3. The tenure of a top up home loan normally corresponds to the original home loan which is fairly long enough to have an easy EMI that can be conveniently adjusted in the monthly budget.
4. The borrower does not need to mortgage any other asset or provide gold, fixed deposits or insurance policies as security for availing this kind of a home loan.
5. There are tax benefits of the top up home loans too. The benefit is allowed only on interest portion as under Section 24.
What are the interest rates and processing fee for top up?
Interest rates are 11.49% to 19%. The processing fee is up to 0.25%. It varies from bank to bank.
What are the documents required for home loan top up loan application?
Documents for identity, Address and Age Proof-
1. Copy of Passport.
2. PAN Card.
3. Driving License.
4. Aadhar Card.
5. Voter’s ID.
6. Ration Card.
What are the required documents for Income and Employment Proof?
1. Last 3 Months Salary Slips.
2. Income Tax Returns.
3. Form 16.
4. 6 Months Bank Account Statements.
5. Employment offer letter.
6. Experience Letter, Letters from HR.
1. Income Tax Returns along with computation of income for the last 3 Assessment Years
2. Last 3 years’ Balance Sheet and Profit & Loss A/c Statements, with Annexures / Schedules
3. Last 6 months’ Current A/c Statements of the business entity and Savings Account Statements of the individual
4. Latest Form 26 AS
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