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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You Should Know How Top-up Loan Works on a Home loan

When you need a large amount, it is common to avail of a loan to cater to your needs. But when you already have a home loan or have recently opted for the home loan balance transfer, you may avail of a top up loan. 

A top up loan is offered above and over your current home loan. 

Based on your home loan eligibility, you can know about an available housing loan amount. Using the top up home loan calculator on a lender’s website, it is possible to know about a precise amount. 

Let’s know how a does top up home loan works and its benefits!

Here’s how a top up home loan works 

Suppose if the home loan value is Rs.50 lakh over a tenor of 20 years. After 10 years, the outstanding amount is Rs.33 lakh; you may be entitled to a top up home loan. If you have paid your home loan EMIs on time, you may find no issues in getting the approval. 

What are the benefits of a top up home loan?

1. A higher loan amount 

You may be able to enjoy up to 70-80% of your property’s market value as a home loan. 

2. Extended tenor 

It is possible to repay the top up home loan over a longer tenor. The loan duration could be 10-30 years or the remaining period of your current home loan. 

3. Lower top up home loan interest rate

The top up home loan interest rate is only a few points higher than your ongoing housing loan. 

4. No restrictions on usages

You can use the top up home loan as per your preferences and without restrictions. 

The documents required for applying for a top up home loan is also less cumbersome. 

If you need a higher amount on your current housing finance, you can opt for a top up home loan.

Read more: Consider these things Before Opting For Top Up Home Loan

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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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Reasons Why You Should go for a Top-Up Loan

When you have taken out a loan, a top-up is an additional advance over and above the existing loan amount. Such a facility is popularly termed as top-up loan. It is particularly helpful when borrowers need new credit, but do not seek to avail external financing.  As the borrower's credentials are already submitted to the lender, securing top-up is hassle-free and less time-consuming. 

Here are some of the dominant reasons why a top up loan can be a favourable option -

• Faster processing and disbursal 

Since this additional credit facility is availed from an existing lender of home loan, both the verification process and fund disbursal happens quickly. All the relevant documents of the borrower have already been vetted. 

• Simpler criteria 

While borrowers opting for balance transfer can readily avail a top-up loan, it involves the simple CIBIL score criteria 750 or up, and a healthy credit repayment history. 

• No-end use restriction 

One of the major advantages of this additional credit is that there is no restriction on final utilisation of this fund. You can use to it meet any requirements, which may or may not be related to housing. For example, you would have the liberty to use it for interior decoration or to meet a medical emergency. 

• No further collateral

Borrowers are not required to submit any other collateral apart from what has already been mortgaged while taking out the home loan. Naturally, this credit line is a favourable option among borrowers. 

• Easy interest rate 

The interest rate on top-up is relatively lower than other unsecured loans, making this credit facility more cost-effective. 

• Income Tax benefits 

Borrowers can enjoy income tax benefits for funds available under this credit facility if used for a home extension, renovation, construction, etc. 

Should you seek to derive the full benefit of this credit line, find out about the top-up loan option on the home loan offered by your lender, and streamline your plan to use funds, accordingly. 

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

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