A top-up home loan is a type of loan that allows homeowners to borrow money over and above their existing home loan. This loan is a great option for those who need extra funds to cover unforeseen expenses, such as home repairs or renovation, education fees, or any other personal expenses. In this article, we will cover all the important aspects of top-up home loans you must know.
How does a top-up home loan work?
A top-up home loan is an extension of your existing home loan. If you have already taken a home loan, you can apply for a top-up loan with your lender. The lender will evaluate your creditworthiness, repayment history, and other factors before approving the loan.
The amount of the top-up loan you can get depends on your bank’s policy and the amount of equity you have built up in your home. Typically, you can get up to 70-80% of your property’s current market value as a top-up loan. However, the amount may vary from lender to lender.
What are the benefits of a top-up home loan?
- Lower interest rates: One of the main benefits of a top-up home loan is that it allows homeowners to access funds at a lower interest rate than other forms of credit. By taking out a top-up home loan, homeowners can access the funds they need to cover expenses, such as home renovations or repairs, education expenses, or the money needed to finance a second property investment. They can do so without having to pay the higher interest rates associated with personal loans or credit cards. However, it is subject to the person’s eligibility whether they get such a loan.
- Easy approval: Top-up home loans are easier to get approved than other loans because your lender already has your financial history and property details.
- Tax benefits: If you purchase or construct a new property you can avail of tax exemption on the interest on both the principal and top-up loan as per eligibility. However, certain limitations apply as specified under Section 80C and 24(b) of the Income Tax Act. For renovations or repairs, only the interest component is eligible for the deduction, and relevant documents must be kept for exemption.
- Flexible repayment options: You can choose a repayment tenure that suits your financial situation. Typically, top-up loans have a repayment tenure of up to 15-20 years, giving you ample time to repay the loan.
What are the eligibility criteria for a top-up home loan?
The eligibility criteria for a top-up home loan may vary from lender to lender. However, some common requirements include:
- You must be an existing home loan borrower with a good repayment history.
- Your property must show value appreciation since you took the original home loan.
- You must have a steady income source to repay the top-up loan.
- Your credit score should be good.
There are numerous lucrative options available in the Bangalore real estate market if you are looking to renovate or buy flat in Bangalore by taking a top-up home loan. One such area to consider for investment is Electronic City, Bangalore. Electronic City is a great location for buying or renovating a home since it is a rapidly developing area with good infrastructure and amenities.
Apartments in Electronic City are in high demand and are perfect for those looking for a modern and comfortable living space. Flats in Electronic City are also known for their spacious and well-designed interiors. Many residential projects offer spacious 2 BHK flats in Electronic City, which can be a great option for first-time buyers looking to enter the market.