Home Loan Top-Up

A top-up loan allows you to borrow more money from a bank than what has already been lent to you. You can avail of a home loan top-up in case you want to renovate the home you plan on purchasing or if you change your mind and decide to buy a home that costs a little more.

A home loan top-up can also help you take care of expenses such as house registration fees, brokerage or maintenance charges if the amount you borrowed initially cannot cover them. There are several advantages of going for a top-up on your home loan.

The lower possible interest rates at which you can get a top-up on a home loan from top Indian lenders are:

Below mentioned are the benefits of a home loan top-up:

• You can avail a home loan top up at an interest rate already applicable to you. Or, you can get the same at a lower borrowing rate.

• You can use the money you have availed as a home loan top for various things, from revamping your home to taking care of the registration/transaction charges.

• Depending on the bank you take it from, you can even use the top-up money for personal and business expenses.

• If you strictly use the top-up money for construction or renovation purposes, you can claim tax benefits under various sections of the Income Tax Act of 1961.

• Given that you will be dealing with the same lender for a top-up, your approval will come in relatively quickly and easily.

Any borrower wishing to avail of a balance transfer facility on their house loan can avail of a top-up loan facility.

• Both salaried as well as self-employed individuals can apply for a loan as long as they fulfill the top-up loan eligibility criteria.

• Existing home loan borrowers with six months of clear EMI repayments (flexibility is offered in the case of a minimum 1 EMI bounce).

• Applicants with an approved home loan balance transfer request with a clear repayment record of 1 year.

Given that you will be taking a home loan top-up in the capacity of an existing home loan borrower, you will not have to submit any more documents since the lender is already familiar with your profile. In some cases, all you will need to do is submit income proof to prove that you can pay off the extra money you are borrowing as well.

Applying for a top-up home loan is a straightforward process. You can choose from one of the two following ways:

• Visit the bank branch with which you currently have a house loan account and apply for the top-up loan directly.

• Login to the bank website and apply for the top-up home loan online. All you have to do is leave your contact details, and a bank representative will contact you.

If you are strictly using a home loan top-up for constructing, renovating, repairing or extending your home, there are several tax benefits that you can avail for the same.

You can claim these tax benefits under Section 80C and 24(b) of the Income Tax Act of 1961.

In case you are using the money to renovate, alter or repair a home that you have rented out, you can only claim deductions for the interest component under section 24(b). In such a scenario, there is no limit on the deductions you can claim on the interest component of the top-up loan you will repay.

But, if you are occupying the property yourself, the maximum deduction you can claim is ₹30,000 under Section 24(b) for the same.

On the other hand, if you are using the money for purchasing or constructing the property, you are eligible for tax deductions under sections 80C and 24(b) of the IT act for the principal and the interest component you will pay annually, respectively. Under Section 80C, you can claim deductions of up to ₹1,50,000 for the principal component.

It is important to note certain aspects when applying for a home loan top-up. These include:

• Interest Rate: When you apply for a top-up home loan through an existing lender, there is a possibility that it may be offered at a higher interest rate. This is why you should conduct enough research to compare the housing loan interest rates levied by different institutions.

• Loan Tenure: Lenders typically offer existing customers a longer tenure. However, the home loan top-up repayment tenure is usually shorter than the allotted tenure on the home loan.

• No Prepayment Penalty: The most notable aspect of a top-up home loan is that it can be prepaid without having to pay the penalty.