Home Loan Top Up: Things you must Know

Home loan top up!

Does something like this exist? If this is what you wonder, then the answer is YES. Now, instead of being anxious about how to avail it, continue reading. As, we here explain all the essential pointers about this type of loan. So, it’s pivotal to get clarity about fundamentals prior moving to other aspects. Hence, we begin with:

What is a Top Up Loan?

It is an additional amount that an existing loan borrower can procure. However, only the existing home loan borrower can avail of this type of loan. With this amount, you can carry out the renovation work at your place.  It may include the purchase of furniture, renovation, or construction of the property.

It is easier to avail this type of loan as the bank already has your details. Hence, the approval time for a top up loan is relatively low.

How to Calculate Loan Top Up Amount?

Firstly, you should be an existing home loan borrower from the respective bank. Secondly, the bank will check your Loan repayment transaction history. You will be eligible for a loan top-up, only if you have zero bounced EMIs. The bank will not process the loan application if even a single EMI is bounced.

The banks sanction loan based on the property’s market value. The bank will allocate a top up loan only when you fit in the Loan-to-Value criteria. It refers to upto 80% of the property value in India.

Let us understand this with an example.

Let suppose, you have taken a loan top-up of Rs. 80 Lakhs for 20 years. After 10 years your remaining loan is Rs. 48 lakhs. Then, you become eligible for a loan top-up. The bank can sanction you 10% of the original home loan after 12 EMIs. Following this, after 24 EMIs, the bank can grant 20% of the home loan amount as a top up.

*The lending terms vary from bank to bank and are subject to change at any time. 

The top-up loan on the residential property should not exceed over 80 percent of the property’s capital value.

List of Documents You Require to Avail Loan

Below is the list of documents necessary for a top up loan application.

• Address Proof – It must include the permanent and present residence address
• KYC – Know Your Customer
• Income Proof – In case of a salaried person, submit salary slips. However, a self-employed person is required to submit other documents.
• Property Papers – The property on which you wish to avail of the loan.
• Account Statements – The past six months’ bank statements.

Do You Need to proposed Secondary Security to avail Loan?

No. There is no need for secondary security as you are already a home loan borrower at the same bank. That means your verification and security is already done by the bank.

What is the tenure of Top Up Loan?

The maximum tenure of a top up loan is 20 years. However, it depends upon the remaining time frame of the primary home loan. Suppose, your primary home loan is for 20 years, and the outstanding period on the same is 15 years. Then, the duration of top up loan will be 15 years. 

What is the Eligibility Criteria for Top Up Home Loan?

You have to keep the following points in mind when applying for a top up loan:

• In the past year, you should have had zero EMI bounce rate.
• In case of an EMI bounce, settle it before the next EMI is due.
• Loan to Value (LTV) ratio cannot exceed over 80%

What are the Benefits of Additional Home Loan?

A top-up loan is an additional amount that you can draw on the account on the existing home loan. You can utilize this amount to give your home a makeover. Or you can buy furniture and can also carry out new construction at your place.

• Firstly, you can get some 70-80% amount to renovate the home.
• Secondly, repayment of the top-up loan is helpful to lower the monthly EMI.
• Thirdly, it can avail you tax rebates under Section 24B and Section 80C.