All you Need to Know about Home Top-Up Loan

Top-up loans are offered by lenders to their existing home mortgage customers to back the latter’s personal or professional requirements. Availing home top-up loan does not require fulfilling any additional eligibility criteria or furnishing any new documents. Additionally, the non-requirement of further verification process also makes the loan-approval and disbursement process quick and easy.

A home top-up loan is a type of secured loan that can be used by a homeowner to raise funds for any purpose through a process known as mortgage origination. This type of loan is usually given by a financial institution, mortgage company, for the purpose of buying a property or to investing a commercial property.

If you have access to a home top-up loan, it can allow you to own your real estate, since the entire buying price will not be provided upfront by you. The home loan rate is either fixed or floating, which can be paid monthly along with a contribution to the principal loan amount. In a fixed-rate loan, the interest rate and the periodic payment are generally the same each period.

Now that you know what is a home top-up loan, here are its benefits

No restriction on usage

One of the most significant benefits of a top-up loan is that it has no end-use restriction. Borrowers can utilise this amount for any purpose they deem fit. For example, a top-up loan can be used for higher educational purposes.

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Longer tenor

The tenor of a top-up loan can go up to the outstanding tenor of the home loan. The customer’s profile and his/her other financial obligations may also play a role in the determination of the top-up loan tenor.

However, customers should keep in mind that their existing loan and their top-up loan amount must not exceed the LTV ratio set by the financial institution.

Lower interest rates

The interest rate of a top-up loan solely depends on the financial institutions. However, compared to other unsecured credit facilities available in the market, such loans offer a lower interest rate. Thus, borrowers can fulfil their urgent financial needs with a top-up loan without paying expensive EMIs.

home top-up loan

Income tax benefits

One of the home top-up loan benefits is that it offers additional tax benefits to the borrowers. However, such tax benefits depend on the end-use of the loan amount.

For example, a borrower who invests his/her loan amount back into the property in the form of renovation, alteration or repair can avail income tax exemptions. Under section 24(b), he/she can claim income tax deductions of up to Rs.30,000 on the interest paid on this loan.

On the other hand, if this loan amount is invested in the purchase or construction of a new property, it also qualifies for income tax exemptions. Under Section 24(b), borrowers can avail income tax benefits of up to Rs.2 lakh on the amount paid in such cases.

Home top-up loan has no collateral

Borrowers do not have to mortgage any additional asset to avail a top-up loan. Since this loan is offered on the existing home loan, which has the necessary securities submitted already, no other collateral is required.

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Quick loan processing time

Last but not least, one of the crucial benefits of a top-up loan is that it has a quick processing time. Lenders already have the necessary documents; thus, it shortens the loan application and disbursement process.

Borrowers planning to avail home top-up loans can do so through their existing lender. However, in case the financial institution does not provide such facilities, they can opt for a balance transfer and switch to a lender that offers such loans.

A top-up loan is a highly beneficial credit to tackle any planned or non-planned financial requirements. Borrowers can visit the official website or get in touch with the representatives of their lenders to know about top-up loans on a home mortgage.

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