What is Top Up Home Loan: Tax Benefits, Eligibility And Interest Rates
If you have an existing home loan and are in urgent need of extra cash, you could apply for top-up home loans. Most banks and NBFCs offer top up on home loans at attractive rates. The loan amount depends on your eligibility. The interest rates are the same as home loan interest rate. So, the benefit? You could use a top-up home loan for any requirement. An excellent alternative to personal loans, let’s understand what are top-up home loans and how do they work.
Top-up Home Loan Interest Rates in 2022
Refer to the table below to check latest interest rates for top up loans:
| Lending Institutions | Interest Rates Starting From (per annum) | Processing Fees |
| Navi Home Loans | 7.39% onwards | Check with lender |
| Kotak Mahindra Bank | 7.50 % onwards | 0.5% |
| Axis Bank | 7.60% onwards | 1% |
| Yes Bank | 8.95% onwards | 1.5% |
| ICICI Bank | 7.60% onwards | 0.5% – 2% |
| HDFC Bank | 7.55% onwards | 0.50% |
| Bank of Baroda | 7.45% onwards | 0.50% |
| Bank of India | 7.40% onwards | 0.25% |
| LIC Housing Finance | 7.50% onwards | Check with lender |
| Federal Bank | 8.55% onwards | 0.50% |
| Union Bank of India | 7.40% onwards | 0.50% |
| Reliance Home Finance | 9.75% onwards | 0.5% – 1% |
Features of Top-up Housing Loans
1. Competitive interest rates
Top-up home loans either have rates similar to existing home loan rates or a few points higher than the original loan rates. Still, top-up home loan rates are lower than personal loan rates.
2. Flexible tenures
Depending on the lender, the repayment tenure of a top-up loan can extend between 10 and 20 years. It can also go as long as the repayment period of your current home loan. This is much longer than options like personal loans, car loans, or gold loans.
3. Utilisation
You can use this loan to meet various requirements. Some lenders may restrict the spending of this loan to housing purposes, but most don’t. So, you can utilise a top-up loan to fund your child’s education, wedding, medical expenses, etc.
4. High loan amount
Depending on the lender, the maximum top-up on a housing loan can vary. But the total balance usually does not exceed 70%-80% of the property’s value against which the original loan was taken.
What are the Tax Benefits of Top-up Home Loans?
Tax benefits on top-up loans are available, but only when this loan is taken for housing-related purposes. So, if you can prove through receipts and documents that the top-up loan you took was to purchase, construct or repair a residential property, you can claim tax benefits.
Section 80C and 24(b) prescribe the limitations to the tax benefits on Top-up loans. The maximum deduction available on interest payment of a loan taken for repairs and alterations of a self-occupied house is Rs. 30,000. But if it is for a rented property, then no limitation exists.
You can claim these two deductions only on the interest component of the loan.
Also read: How To Choose Banks/NBFCs For Home Loans?
What are the Eligibility Criteria for a Top-up Loan?
Top-up home loans’ eligibility criteria depend on the lending institution. However, there are some common parameters like:
- Age: 21 to 65, can be extended to 70 years for self-employed citizens
- Employment: salaried and self-employed
- Nationality: Should be an Indian citizen (can also be non-resident)
- Work experience: For salaried- 3 years, for self-employed- 5 years in their current business
- Good EMI repayment record. Not more than one EMI bounce in the past year
- Six-month clear repayment of the existing home loan
- Good credit report and CIBIL score
Documents Required for Top-up Home Loan
- Identity proof: PAN card, passport, Aadhar card, driving license
- Address proof: Passport, utility bills, agreement for rent etc.
- Employer Identity card
- Bank statement for 6 months
- Passport-sized photographs
- Salary slip for 3 months (salaried employees)
- Existing home loan details
- Business license (for self-employed)
- Business address proof (for self-employed)
- Last 3 years’ IT returns (for self-employed)
How to Apply for a Top-up Housing Loan?
Every bank and housing finance companies have a different application process. The most common procedure is:
- You can visit the branch of the bank and apply directly with the help of bank employees. You will be required to fulfil the eligibility criteria of the particular bank and present the required documents.
- Most banks now have an option for online applications. You can visit the bank’s website and apply online. After collecting your contact details, the bank will get in touch with you and guide you through the online process.
Benefits of Taking Top-up Home Loan
- Availing of a top-up home loan could help you meet any financial requirement
- You can use this loan for personal and housing purposes.
- The application process and eligibility parameters are less stringent since you already have an existing home loan
- Top-up loans are easy to repay as they have low interest and long tenure
- Minimal documentation required for top-up loans
Also read: What Is A Mortgage Loan? Types, Eligibility & How To Apply
Final Word
Top-up home loans could be a viable option for those in need of additional funds. Instead of paying a high-interest rate on a personal loan, one can get a top-up at the existing home loan interest rate. Also, most top-up loans are offered by lenders based on your eligibility criteria and pre-approved top-loan offers are quite common. So, it isn’t that much of a hassle availing of these loans. However, a top-up loan is still a loan. So, take a top-up loan on your existing home loan only if you’re in urgent need of funds.
In case you’re looking for a home loan, download the Navi app. You could get up to 90% of the property value with Navi Home Loan.
FAQs
Ans: The amount of Top-up loans given varies from one bank to another. But the balance cannot exceed 70%-80% of the property’s value. The loan amount can also vary depending on your credit score and bank statement.
Ans: Depending on the bank, the tenure decided to repay a top-up loan can vary. Usually, most banks allow repayment until the balance tenure of the existing loan or up to 20 years.
Ans: Section 80C and 24(b) prescribe the tax benefits on Top-up loans. But only when taken for housing-related purposes there will be a tax deduction on this loan.
Ans: As every lender offers Top-up loans at different interest rates, you may want to compare mortgage rates before deciding where to take a loan. Keep a note of the tenure of repayment decided by the bank and the maximum loan amount.
Ans: Any borrower who has an existing home loan can avail of a Top-up loan. If you have passed the home loan eligibility criteria, you will qualify for a top-up too. A proof of six-month clear repayment of the existing home loan will be required.
Before you go…
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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