Eligibility criteria, features and benefits of top-up loan

Do you have an ongoing home loan that you are paying a large interest amount on and want to cover your different needs without managing larger interest rates? 

If yes, you can switch your home loan to another lender offering a lower rate. 

This way, not only your home loan interest rate will come down, helping you pay lower EMIs, but even a top up loan. 

A top up loan will help you manage all other needs at a lower rate and a longer tenor. 

Let’s know about the eligibility terms, features and benefits of a top up loan in this post!

What are the eligibility criteria of a top up loan?

All existing borrowers who apply for home loan balance transfer are eligible to avail of the top up loan facility. They also need to procure a few basic documents as required by their new lenders to complete the application procedure. 

What are the features and benefits of a top up loan?

1. Lower interest rate 

Since a top up loan is given on an already active housing loan, the interest rate on a top up loan is lower. It is some points above the active home loan – making it easier for you to manage. 

2. Quick and easy financing 

You need not follow strict terms and conditions to apply for a top up loan. In turn, it lets you get the loan approval faster. 

3. High-value loan money 

Based on your eligibility, the top up loan amount could be as high as up to Rs.1 crore and even more. 

4. No restrictions on funds usage 

You are free to use the top up loan amount for anything as per your needs if the purpose is legal. 

5. Longer repayment tenor 

You don’t have to strain your wallets to repay the top up loan. It is because its tenor is almost the same or less than your ongoing housing loan. 

If you need a considerable amount to meet other needs when you have an active home loan, then a top up loan is what you can rely on. 

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To Do-list for Availing Home Loan at Lowest Interest Rates

Home loans are unsecured debts that come with a lower rate of interest. 

Still, since it is a long-term obligation, many people pay extra interest charges. 

But it is possible to opt for a lowest home loan interest rate after following a few handy tips. Read on!

Here’s how you can enjoy lower home loan interest rates

1. Begin with a higher down payment

The first thing you can do to lower your home loan interest rates is by putting down a higher down payment. You will have to arrange at least 15-20% of your home value as the down payment. No lender approves a full amount. The moment you put a bigger down payment, you end up borrowing less. In turn, it helps you bring down your home loan interest rate charges as well. 

2. Opt for a shorter tenor 

Even though housing loans come with a longer tenor, it means you paying more as interest charges. You can save on interest charges by opting for a smaller tenor. Yes, your home loan EMI amount may increase if you do that. But you will be able to pocket savings on home loan interest rates. 

3. Go for a home loan balance transfer

If you are still unable to bring down your home loan interest rate charges, you can go for a home loan balance transfer. The facility helps you transfer your home loan account from an existing lender to one offering a reduced rate. If the charges of making the switch is higher are than your savings, you should not do it. Many lenders let you avail of a higher top up loan when you switch your home loan accounts to them. The rate of interest and the loan tenor may also be almost similar or a bit more than home loans. 

If you can follow these discussed tips, availing of a reduced home loan interest rate and enjoying savings on repayments may be so easy. 

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Follow These Easy Steps to Reduce Your Home Loan EMI in 2021

The process to compare different lenders and opting for the lowest interest rates is inevitably the modus operandi of most borrowers while availing a home loan. In order to help prospective borrowers out, most financial institutions offer a home loan EMI calculator where one can check the EMI payable beforehand and check if the same matches his/her repayment capacity. 

In case you think that the Equated Monthly Instalments will put severe stress on your budget, consider following the below-mentioned options to reduce your EMI. 

• Negotiate home loan interest rates: Since this factor directly impacts your loan EMI, it is important to negotiate and choose the right interest rate to facilitate easy repayment. In this case, borrowers availing the loan on floating interest rates automatically benefit from the reduction in market rates. 

• Opt for a longer loan tenor: Even though opting for a lengthy tenor increases your total interest outgo, it also reduces the home loan EMI. It is wise to make use of the online home loan EMI calculator to find a suitable loan tenor that makes your repayment process convenient. 

• Pay more as a down payment: Consider making a hefty down payment as it can reduce the amount availed as loan, and consequently the EMI as well. Also, paying a higher amount as a down payment not only reduces your EMI but also ensures fast approval.

• Choose home loan balance transfer: In the case of existing borrowers, a home loan balance transfer is a great way to reduce your monthly financial burden. Find out which lending institution is offering the lowest interest rate at that moment and transfer your loan. 

Both the rate of interest and loan tenor play significant roles in home loan EMI reduction; therefore, it is wise to pay attention to the factors associated with them. Consider comparing different deals offered by financial institutions and use the home loan EMI calculator to plan your repayment at the very onset.

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Important Documents Required for Home Loan Refinance

Many a time, individuals can suffer from sudden financial crises, making it difficult for them to sustain their current home loan repayment. Borrowers can also find themselves stuck with a high interest housing loan while current market rates have lowered. 

Under such circumstances, they can transfer their outstanding amount to a lender offering lower interest rates along with better offers like a top up loan. However, there are certain mandatory documents that you must provide to ensure successful home loan refinancing.

KYC documents

These include documents like Aadhaar card, PAN card, driving license, passport, or voter ID, which serve as identity and address proof.

Loan agreement

Borrowers need to collect the sanction letter or loan agreement of their existing home loan from their current lender.

Home loan statements

It is mandatory for individuals to provide their new lender with details of existing EMI repayments and the total outstanding amount. These details are included in home loan statements that individuals should collect from their current lending institution. 

Consent letter

When opting for a home loan balance transfer, write an application to your loan provider informing them of the same and requesting a consent letter.

NOC

Besides a consent letter, your existing lender must also provide a No-Objection Certificate, stating that they have no disagreement in shifting the funds to another creditor.

Foreclosure letter

This document indicates that your home loan is foreclosed, and you have no due amount with the present financial institution.

Post-dated cheques

Make sure to collect all such pending cheques from your current loan provider before refinancing.

Plus, do not forget to retrieve all property documents from the first lender. Submit these, along with required financial documents to your new financier to avail benefits like a top up loan. Such additional funds can help you cater to increased financial obligations in case of a crisis.

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Important Factors You Should Know Before Taking aTop-Up Loan on a Home Loan

 With a top-up loan, which is usually available during home loan balance transfer, a lender extends an additional credit line over and above the existing loan amount. Such credit is usually available at an easy rate of interest. Nonetheless, there are a few important factors that borrowers should keep in mind before availing a top up loan on home loan –

• Conditions to avail it 

To be eligible for such an additional loan amount, borrowers need to initiate the home loan balance transfer process. Moreover, one needs to have a regular repayment record as well. 

• No end-use restriction

 There are no limitations imposed on home loan top up in terms of its usage. The fund may be utilised to meet any number of expenditures that the borrower sees fit. 

• Tenure

The maximum repayment tenure of a top up loan is 20 years, or till the period of repayment of the home loan. This loan tenure also depends on the borrower’s age, income, credit profile and property value. For such credit, you can calculate your monthly outgo with the help of a top up loan calculator.

Must Read: Things you should know before taking a top-up loan.

• Amount limit

Even though the total balance does not usually exceed 70% to 80% of the total property valuation, the maximum top up loan amount sanctioned varies from one lender to another.

• Tax benefits 

If you have used the top up loan amount for construction, extension or renovation of a home, or funding children’s education, you are entitled to claim tax benefits. 

Thus, a top up loan can provide you with much-needed liquidity when you are in need of urgent funds. You would not have to undertake the hassle of applying for a fresh loan to avail the funds. Moreover, this credit is also available at a competitive rate of interest.

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Documents Required for Home Loan Refinancing

Individuals looking to avail a lower interest rate on their existing housing loan have the option of transferring the outstanding balance to a new lender. However, one needs to submit a few documents to initiate this home loan balance transfer process -

1. Consent letter 

An existing borrower needs to put in a written application to the current lender intimating about the balance transfer and issuance of consent letter for the same. 

2. No Objection Certificate

One has to obtain NOC from the present financial institution that indicates assent to transfer the outstanding loan amount to a new lender. 

3. Loan agreement

This agreement pertains to a sanction letter issued by the initial lender. 

4. Foreclosure letter

 It declares that the loan is foreclosed at a specific date without any outstanding balance. 

5. Post-dated cheques

To obtain a housing loan, borrowers have to submit post-dated cheques with the lender. These pending cheques are subsequently to be deposited with the new housing finance company. 

6. Property documents

Property documents are highly important for a home loan balance transfer. The entire set has to be submitted to the new financier.  

7. KYC documents

 The new financial institution would require these KYC documents –

• Identification proof 

• Aadhaar card 

• PAN card 

• Voter card 

• Driving license 

• Employment ID card issued by NREGA  

• Address proof

• Aadhaar card 

• Passport 

• Driving license 

• Voter ID 

8. Employment documents 

 These financial documents are essential for balance transfer –

• Latest salary slips 

• Previous six months' salary account statement 

• Form 16 from your present employer 

9. Property related documents 

For home loan transfer, the following set of documents are also required to verify the purchase of your property –

• No Objection Certificate from housing society or property developer 

• Property purchase documents 

• Registration certificate

• Stamp duty papers 

Depending on the new financial institution, further additional documents may have to be submitted for a home loan balance transfer, apart from your photograph and application form of the original lender. 

One should note that availing a top-up loan during balance transfer does not require borrowers to submit any additional documents.

Read Also: Important Things to Consider before Transferring Your Home Loan

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