Need More Funds After Availing a Home Loan? Get a Top-up Loan

Posted by mymoneymantra on July 30th, 2018

In the present times, when the prices of the residential real estate are virtually sky-rocketing, there are very few options in front of you to purchase your own home. One if the most suitable and preferable option is to buy your home by Availing a Home Loan from any of the numerous financial institutions in India. When you purchase a residential property in which you would be living with your family, there are various other expenses also involved, which are over and above the amount to be paid to the seller. Some of the significant expenses include:

-       Margin money paid to the lender

-       Payment of Stamp Duty

-       Payment of Registration Charges

-       Payment of TDS (on the amount paid to the seller, usually is 1% of total transaction)

-       Renovation Expenses

-       Moving Expenses

-       Other miscellaneous expenses

This money has to be paid from your own pocket as most of the lenders do not finance most of these expenses along with the Home Loan, the only amount they may finance is the renovation expense which will be disbursed as and when you provide the receipts and invoices for such expenses.

As a result, by the time you are finished taking care of all these expenses and have decorated your house as per your wishes, your savings would have been entirely wiped out and you might have had to borrow some money from your friends or relatives also. This is a very precarious situation because you never know when an unexpected expense may come up and you would be left helpless because you have already borrowed from your friends and your bank account is just at its bare minimum.

There is no need to be disheartened by this situation because your home would come to your rescue. If you have been repaying your Home Loan EMIs (Equated Monthly Instalments) on time for the last couple of years, then you can conveniently avail a high-value top-up loan against it and use it to manage your personal finances efficiently.

About Top-up Loans

A top-up loan is another form of a secured loan which offers you an excellent source of finance to take care of your financials and help you to handle any emergency that might come up. It is extended to you only if you are running a Home Loan and it would be extended only by your Home Loan provider. This facility can be availed by you only if you have been repaying your EMIs on time and the maximum amount available is calculated as Total Home Loan Sanctioned minus Total Amount Outstanding, i.e., the difference between the loan you had availed and the amount that is outstanding. The money is offered only after extending mortgage on your existing Home Loan, and the rate of interest would be around 1-2% more than the home loan interest rate. You can use the money as per your requirements as there is no need to inform the lender regarding the usage of money. The maximum repayment tenor that is offered is the remaining period of the Home Loan.

Benefits of a Top-up Loan

Some of the significant benefits of a top-up loan include:  

- No additional security required

The top-up loan is offered to you against your running Home Loan and the property mortgaged with the bank. There is no need to provide any additional security as you are offered the amount after extending a mortgage on your existing Home Loan.

- Low interest rates

You only need to pay a marginally higher interest rate as compared to the Home Loan, usually around 2%. This offers you a cheaper source of finance as compared to Credit Cards or Personal Loans.

- No preconditions

There are no pre-conditions regarding the usage of the loan money. You can use it for home renovation, foreign education, dream vacation, paying off your credit card bills or for any other expenses that you may have coming up.

- Long repayment tenure

The repayment tenure for a top-up loan is also extended with the maximum repayment tenure being the remaining duration of your Home Loan. This makes sure that your EMI burden is not increased all of a sudden. You can opt to foreclose or prepay the loan amount as you wish because there are no prepayment charges levied against the same.

- High-value loans

The maximum loan amount available as a top-up loan can be the difference between the original loan amount and the amount outstanding. This way you are able to access a higher loan amount for your financial requirements.

How to Apply?

In order to apply for a top-up loan, you must contact your lender and request them to consider your application for a top-up loan. They will assess your eligibility and would inform you if you are eligible for the same or not. If your lender is not willing to offer a top-up loan to you, you can opt for a Home Loan Balance Transfer to a new lender who is willing to offer you a top-up loan along with the home loan balance transfer.

A top-up loan offers you an excellent opportunity to take care of any major expenses that you may have coming up and do not have adequate funds to take care of the same. Just make sure that as the money carries a higher rate of interest, you should borrow only as much money as you require.

Also Read: Home Loan Top-up: What are the Benefits and How to Get it

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