Home Top Up Loan – Meet Your Housing Requirements

September 15, 2022

A house has a voice of its own, reflected through its maintenance, interior, fixtures, and renovations. Keeping this voice tuned requires a great amount of money, initiating the need for a top-up loan on house loans. A top-up loan allows a person to take an additional loan over their existing housing finance and cope with the new requirements their beloved house seeks for.

Meet your housing needs with easy access to funds through a top-up loan. Here’s everything you must know about home loan top-up, offered interest rates, benefits, and much more.

What is a Top-up Loan?

A top-up loan is an extra amount of money borrowed above and over the housing fina that already exists. The borrowed amount and tenure depend on the lender you count on to secure your loan. One point falls in the basket of consumers when they get the freedom to avail of top-up loans from either their current lender or swim the ocean to choose a new one. The home loan top-up interest rate differs from lender to lender, starting from 7.1%. The processing fee can go to a maximum of 1% of the amount of loan availed.

Best Home Loan Top-Up Interest Rates

The interest rates offered on top-up loans by various banks are listed below. Choose the best home loan top-up the interest rate that matches best with your requirement:

Name of the Bank offering Top-up Home Loan Interest Rate Offered
HDFC Bank 8.30% – 9.15% p.a.
State Bank of India 7.90% – 10.10% p.a.
Axis Bank 7.75% -8.40% p.a.
Union Bank 6.80% -7.35% p.a.
Bank of Baroda 7.45% – 8.80% p.a.
Citibank 6.75% p.a.
MahaBank 7.55% – 8.55% p.a.

Note: The rates are applicable in the month of September 2022.

Advantages of Top Up Loan

When you count on a top-up loan, you unlock doors to the following benefits:

  • The top-up loan interest rate is lower in comparison to the interest rates on personal loans.
  • The funds come with flexible end use, and you can contribute them towards various requirements like renovation, construction, maintenance, etc.
  • If the bank allows, divert the funds to business or personal needs.
  • The loan disbursal process is quick.
  • The process of getting a home top-up loan is convenient and hassle-free
  • If the funds are utilized purely in renovation or home construction, the borrower may avail of tax benefits.
  • Several banks provide the option of balancing a home loan with a top-up loan. If you select this option, consider the processing fees that you will have to pay for transferring the loan to a new bank, the fees associated with foreclosure with the current bank, and the difference in interest rates. Consider all options carefully, then select the one that best suits your needs.

Tax Benefits on Home Loan Top Up

If the loan has solely been utilized for the means of building, renovating, extending, or repairing a familial property, one can claim the benefit of tax on home top-up loans. A tax deduction of INR 30,000 at maximum will be allowed on the utilization of a top-up loan for the procurement of a home for self-occupancy. There is an absence of any limit on the deduction when you utilize the borrowed funds for a rental property. However, each of these is covered by INR 2 lakh in total annual tax deductions granted on home loan interest.

The principal and interest part of the top-up loan qualifies for a tax deduction if used to purchase or construct a new property, up to the maximum allowed under Sections 80C and 24. (b). However, if the home loan top-up is used for the renovation, alteration, or repair of a residential property, deduction benefits apply only to the interest portion.

To be able to claim the tax benefits, it is crucial to keep track of all the receipts and paperwork related to work done on the residential property using the top-up loan.

Documents Required

The documents required for the top-up loan on a home loan depend upon the lender to lender. Normally, the following documents are required:

  • Proof of identity like an Aadhaar card, passport, voter ID card, driving license, PAN card, etc.
  • Past three months’ salary slips are required for applicants earning a salary
  • Proof of address like passport, rental agreement, utility bills, etc.
  • Past three months’ bank statement showcasing income details
  • Passport-size photographs

Eligibility Criteria

If you are seeking or have previously received a housing loan from the bank, the eligibility requirements for the home top-up loan will be the same as those for the home loan. The eligibility requirement may differ from bank to bank. However, some of the crucial considerations to bear in mind are as follows:

  • There shouldn’t have been EMI bounce the year before. At maximum, one installment bounce is acceptable.
  • Before the subsequent EMI is due, you must settle EMI bounces (if any).
  • It is necessary to have repaid the existing mortgage in full for 6 months.
  • One year of uninterrupted repayment history is crucial for top-up loans when paired with balance transfers from other banks’ home loans.

The following requirements (which may vary from bank to bank) are the same as those for home loans:

  • A person should fall in the age bracket of 21 to 65 years.
  • Their nationality must be Indian, irrespective of their citizenship.
  • Salaried employees and self-appointed residents are eligible to secure top-up loans.

Fee and Charges

The following table depicts the processing fee of a few of the major lenders in India:

Name of the Bank Fee
SBI 0.40% of the loan amount plus applicable GST
HDFC Ltd. 0.50% of the loan amount plus applicable GST
ICICI Bank Up to 0.50% of the loan amount plus applicable GST
Axis Bank Up to 1% of the loan amount plus applicable GST
Bank of Baroda 0.25% of the loan amount

Note: These rates are provided as of September 2022.

Who can Apply?

The borrowers having an existing home loan or home extension loan, or even a home improvement loan, can apply for a top-up loan.

Repaying The Top Up Loan

The bank officials will establish a new EMI amount based on the current home loan interest rate and the balance of the top-up loan.

How to Apply for a Top-Up Loan?

Visit the official website of the current lender to submit an application for a top up loan under the Home Loan category. Additionally, you can physically visit the closest branch office of your current lender. To find the finest price and offer, check the interest rates and margins offered by several lenders before choosing one as the lender for this facility.

Additionally, you must first apply for a home loan balance transfer with the new preferred lender in order to receive a home loan top-up from a different lender.

Factors to Consider When Evaluating a Top-Up Lender

Getting a top-up loan on a home loan requires precision. The finance provider will evaluate the home loan top-up an application based on the given factors:

Loan Amount

A few banks provide their existing customers with a limited amount of top-up loans, whereas other banks put no such limit. You must evaluate your bank before opting for a top-up loan. The loan amount offered to you by a lender is decided after taking into consideration many factors such as repayment history, missed EMIs, etc.

Rate of Interest

The top-up loan interest rate is the biggest contributor when deciding upon a top-up lender. Depending on the existing lender, the newly chosen bank may provide a higher or lower interest rate. Compare the interest rates of top-up loans offered by your bank to current clients with those offered by other banks to new customers before finalizing your decision.

Tenure

Tenure plays a vital role when deciding on a lender for a home loan top-up. Many banks offer their existing customers a long term, whereas some banks provide a tenure shorter than the existing home loan tenure.

Another factor that must be evaluated when opting for a lender is that there is no penalty on prepayment of top-up loans.

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Frequently Asked Questions (FAQs)

What is a Top Up Loan?

A top-up loan is an additional loan taken on an existing home loan.

How much top-up we can get on a home loan?

The tenure and amount of top-up home loan you can get depends upon one lender to another.

Who can avail of a Top Up Loan?

People who have an existing home loan, possess a good credit report and have appropriate income and age can avail of top up loans.

Is Top up home loan a good idea?

Top up loan is a convenient way to fulfil your urgent financial requirements. Even though the interest rate is 1.5%-2% higher than the existing loan, it is still less than a loan against property or personal loans.

What is the processing fee for top up loan?

The processing fee for top up loan varies from bank to bank.

Can I use a home loan top-up for personal use?

Yes, you can use a home loan top-up for personal use.

What is the maximum term for which I can avail of a Top Up Loan?

The maximum term for which you can avail of a Top Up Loan depends upon your bank. However, the general tenure is of 20 years.

What is the security that I have to provide for a Top Up Loan?

Due to its nature, a top up loan does not require any security or guarantor

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