What Is A Top Up Home Loan And How It Works?

Owning a home is a dream for many, and getting a home loan is often the first step towards making that dream a reality. But what happens when you need additional funds to furnish your home, renovate it, or cover personal expenses? This is where a top up home loan comes into play.A top up home loan allows you to borrow extra funds over and above your existing home loan. Here, we will explore everything you need to know about top up loan on home loan.

Understanding home loans

Before we dive into what is top up loan on home loan, let us first understand how a home loan works.

A home loan is typically taken to purchase, construct, or renovate an existing house. The eligibility for a home loan is based on factors such as income and repayment capacity. Most lenders offer home loan amounts between 75-90% of the property's value, while the remaining amount is expected to be paid by the borrower as their contribution.

You can use a home loan calculator to estimate your eligibility and monthly EMIs. House loan interest rates can be negotiated with banks or financial institutions. The application process is often straightforward, and you can select smaller EMIs with longer tenures that suit your financial capabilities.

What is top up loan on home loan?

A top up loan on home loan is an additional borrowing option provided to individuals who already have an existing home loan. The top up loan amount is calculated based on the principal amount of your original home loan.

Top up home loan eligibility

Now, when you know what is top up loan on home loan, let us understand the eligibility criteria for the same. 

To be eligible for a top up home loan, you must have an existing home loan. However, you need to wait for at least one year before applying for a top up loan on a home loan. The exact eligibility criteria may vary from lender to lender.

Top up house loan interest rates

One of the significant advantages of a housing loan top up is that it generally comes with lower interest rates. This is because the top up loan on a home loan is secured against your property, making it less risky for the lender.

Benefits of top up home loans

1. Lower house loan interest rates: As mentioned earlier, top up home loans come with lower interest rates than personal loans.
2. Higher loan amounts: The maximum loan amount you can get through a top up loan depends on factors such as the value of your property and the outstanding amount on your existing home loan.
3. Convenient repayment options: Top up home loans offer flexible repayment options with longer tenures.
4. Quick disbursal: Since it is a top up loan on your existing home loan, the approval process is relatively quick, and the funds can be disbursed quickly.
5. Tax benefits: Just like a regular home loan, you can also enjoy tax benefits on the interest paid for a housing loan top up under section 24(b) of the Income Tax Act.

Conclusion

A top up home loan can be an excellent solution when you need additional funds for various purposes while having an existing home loan in place. The feature offers lower interest rates, flexible repayment options, minimal documentation requirements, and quick processing.If you find yourself in need of extra funds for furnishing or renovating your home or even meeting personal expenses, check out top up home loans from Mahindra Finance. With competitive house loan interest rates, we help you get your dream home without breaking the bank.

FAQs

Q1: Can I apply for a top up home loan from a different lender than my existing home loan?

A: Yes, you can opt for a top up home loan from a different lender if they offer better terms and conditions.

Q2: What is the difference between a top up home loan and a personal loan?

A: The main difference is that a top up home loan is secured against your property, while a personal loan is unsecured.

Q3: Can I use the funds from a top up home loan for any purpose?

Yes, you can use the funds from a top up home loan for various purposes, such as furnishing your home, carrying out renovations, or covering personal expenses.

Q4: Can I get a top up home loan if I have recently taken a home loan?

Yes, you can apply for a top up home loan as long as you have completed at least one year of repayment on your existing home loan.

Q5: Will the interest rate on a top up home loan be higher than my existing home loan?

No, the interest rate on a top up home loan is usually lower than personal loan interest rates but slightly higher than your existing home loan interest rate.