Home Loan Top Up vs Balance Transfer
Posted by Sarita Yadav on June 20th, 2022
You are well aware of your repayment schedules if you have taken out a home loan to achieve your aim of buying a dream home. You've budgeted well and are making EMI payments. But what if something unexpected happens that throws your best-laid plans into disarray? An unexpected financial crisis or a pay cut, for example, may necessitate more finances to satisfy your repayment obligations. To assist you to get through the crisis, lenders provide solutions like a home equity loan or a house loan balance transfer.
But if the question on your mind is which of the two is better: home top up loan vs balance transfer, they are options that come with their own set of advantages. While a home top-up loan might help you stretch your budget to cover unexpected expenses, a home loan balance transfer helps you make your current debt more manageable.
Difference between Top-Up Loans and Balance Transfer
Now that you know what a home top up loan and balance transfer means, it’s time to understand which of the two are better: home top up loan vs balance transfer and under what circumstances you may opt for either one of them.
|
Particulars
|
Home Loan Top Up
|
Home Loan Balance Transfer
|
|
Meaning
|
A bank or other financial institution may give you a home loan top up as an additional loan on top of your current loan. A borrower might get a top-up loan from the same lender or from a different one.
|
A home loan balance transfer allows you to move your existing home loan to a new lender with a lower interest rate. So, if you have a house loan with a 10% interest rate, but after doing some research, you discover that a different lender provides a home loan with an interest rate of 8.5 percent, you may want to consider a home loan balance transfer to take advantage of the lower interest rate.
|
|
Purpose
|
A house loan refinance can be used for any purpose. They don't have any restrictions on how they're used, so they may be used to pay for a wedding or higher education.
|
A home loan balance transfer is when you move your outstanding home loan balance to another lender in order to get cheaper interest rates on your loan. This money can only be used to pay off your house loan.
|
|
Availability
|
A home top-up loan can be taken out at any time during the financing process.
|
Only after 12 monthly instalment payments with your previous lender are you eligible for a home loan balance transfer.
|
|
Loan Amount
|
A home loan top-up cannot exceed 70-75 percent of the amount calculated by subtracting the outstanding loan amount from the estimated market value of your home.
|
A home loan balance transfer may be permitted for 80 to 90% of the property's entire worth.
|
|
Loan Tenure
|
A top up loan is given for the remaining period of your current home loan. The tenure may vary from lender to lender.
|
A balance transfer lets you make the most of the low interest rates and reduce your repayment tenure.
|
Eligibility Criteria for Top-Up Loans and Balance Transfer
While there are certain distinctions between a home top-up loan and a balance transfer, the two have different qualifying requirements. The criteria for both alternatives are shown in the table below.
|
Home Loan Top Up
|
Home Loan Balance Transfer
|
|
You must have previously taken out a home loan from a lender. If your house loan was disbursed three months ago, you can apply for a top-up.
|
You currently have a home loan that you have paid off in 12 monthly instalments.
|
|
A top-up loan is approved after the lender examines your repayment history on your existing loan and determines whether any defaults have occurred.
|
You'd have to be the owner of the property. For a house loan balance transfer, it must be under renovation or construction. EMI payment failures must be avoided in order to be qualified.
|
Whether you pick a home loan top-up or a balance transfer, it's a good idea to examine your needs first before making a decision. In addition, if you pick a home loan balance transfer, you may also choose a top-up loan. If you choose for a balance transfer, you'll need to see if the new lender offers a considerably cheaper interest rate, which might help you shorten your repayment period. If you choose a top-up, you will receive an additional loan to assist you with other expenses. So, before deciding on a house loan balance transfer or a top-up, assess your circumstances, your financial demands, and your income.
