How Do You Secure Benefits of a Home Loan Top-Up – Explained!



Taking a home loan does not necessarily mean that all financial commitments are taken care of. There are many cases where home loan borrowers look to renovate their homes. It does not always have to be this reason, you might have to pay for a medical emergency, fund a wedding, clear your kid’s education fees, or any other reason. Since the monthly income is already strained by paying the home loan EMIs, it might not be possible to rely on savings for these expenses.

In such cases, one effective solution could be taking a top-up on the home loan. A top-up is an amount that the lender can offer above the existing home loan. Here is how to secure the benefits of a top up home loan:

  • Enjoy a low interest rate on the top-up loan 

One of the biggest advantages of taking a top-up loan is that it offers an affordable interest rate. Usually, a top-up loan’s interest rate will be 1.5% to 2% more than the home loan interest rate. However, a top-up loan’s interest rate is much lower as compared to other loans, such as a loan against property or a personal loan. Even a slight difference in the housing loan interest rate can have a significant impact on the overall cost of the loan.

  • Get a long tenure to repay the loan

For a car loan or other type of loan, borrowers are supposed to repay them in short repayment periods, usually lasting up to 5 to 7 years. However, when you apply for home loan top-up, the lender will permit its repayment to last throughout the balance tenure of the existing home loan. So, if the home loan tenure has 10 years remaining, you get the same tenure to repay the top-up loan too. A long tenure means that neither your monthly income nor savings take a big hit. This is because it is easier to manage smaller monthly instalments over a long period of time.

  • Avoid any eligibility hassles 

Applying for a new loan means going through an entire application and documentation process. The lender will collect all required documents, conduct a thorough verification to make sure that all their eligibility criteria are met, and ensure there are no discrepancies. This entire process will obviously take time. However, this is something that is avoidable while opting for a top-up loan. Since you have already submitted all the required documents while applying for the home loan, the lender does not need you to repeat the process. If a good rapport has been maintained with the lender and the monthly instalments are being paid on time, getting a top-up loan should be a smooth process.

Also, please note that it is not always necessary to stick with the same lender while getting a top-up loan. It is possible to go for a home loan balance transfer if the new lender is offering a top-up loan and a lower interest rate.