Best 5 Top Up Home Loans: Eligibility, Interest Rates And Benefits

What Is Top Up Home Loan?

A top up home loan is an additional loan that borrowers can avail of on top of their existing home loan. 

This type of loan allows homeowners to tap into the equity they have built in their property to fulfil their financial needs. 

The loan amount is determined based on the current market value of the property and the outstanding balance of the existing home loan. 

With a top-up loan, you can access funds without the need for additional collateral or lengthy documentation.

Eligibility Criteria For Top Up Home Loan

To be eligible for a top-up home loan, you need to meet certain criteria set by the lending institution. While the specific requirements may vary between lenders, here are some common factors considered during the evaluation process:

1. Property Ownership: You must be the owner of the property against which the top-up loan is sought. The property should be free from any encumbrances.
2. Loan Repayment Track Record: Lenders assess your repayment track record for the existing home loan. A consistent repayment history reflects your financial discipline and increases your chances of approval.
3. Loan-to-Value (LTV) Ratio: The maximum loan amount you can receive is determined by the LTV ratio. Lenders typically allow a certain percentage of the property’s market value as a top-up loan. The exact ratio may vary, but it is generally around 70-80%.
4. Credit Score: Your credit score plays a crucial role in determining your eligibility for a top-up loan. A higher credit score signifies your creditworthiness and demonstrates your ability to manage debt responsibly.
5. General Criteria

• The age limit of applicants should be 21 to 65 years.
• Salaries professional or Self-employed persons can avail of this type of loan.

Interest Rates For Top Up Home Loan

The interest rates for top-up home loans are usually slightly higher than those for regular home loans. 

However, they are generally lower than personal loan interest rates since the property acts as collateral. 

The specific interest rate charged by lenders may depend on various factors such as the borrower’s credit profile, loan amount, and tenure. 

It is advisable to compare interest rates offered by different lenders to secure the most favourable terms.

Here are the interest rates of the leading lenders listed below,

1. HDFC Bank Top Up Loan 

HDFC offers top up home loans at attractive interest rates starting from as low as 8.75%. The rate of interest rate may differ based on factors such as the loan amount, repayment tenure, and credit score.

2. SBI Top Up Loan

State Bank of India (SBI) provides top up home loans at competitive interest rates starting from 8.80%. The interest rate offered by SBI is influenced by factors such as the loan amount, tenure, and the borrower’s credit profile.

3. ICICI Bank Home Loan Top Up

The current home loan interest rate in ICICI bank starts from 8.75% p.a & top up home loan interest rate would be +1% p.a. of home loan interest rate.

4. Axis Bank Top-Up Loan 

Axis Bank provides top up home loans at attractive interest rates starting from 8.75%. The interest rate offered by Axis Bank is influenced by factors such as the loan amount, property value, and the borrower’s credit score.

5. BOI Bank Top Up Loan

Bank of India offers a top up home loan facility starting from 8.85%. You need to qualify for eligibility criteria such as loan amount, age criteria, and credit score to get a loan at a minimal interest rate.

Benefits Of Top Up Home Loan

Now that we have explored the basics of top up home loans, let’s delve into the benefits that make this financial product an attractive option for borrowers:

Lower Interest Rates

Compared to personal loans or other unsecured forms of credit, top-up home loans offer comparatively lower interest rates. This can result in significant savings over the loan tenure.

Flexible Use of Funds

One of the key advantages of a top-up home loan is its flexibility in terms of fund utilization. Whether you want to finance a wedding, consolidate high-interest debt, or invest in a business venture, the choice is yours. There are usually no restrictions on the purpose of the loan.

Easy Approval and Processing

Since the top-up loan is an extension of your existing home loan, the approval process is typically faster and more streamlined. Lenders already have your property documents and financial history, which simplifies the documentation requirements.

Tax Benefits 

Under certain circumstances, the interest paid on a top-up home loan may be eligible for tax deductions, similar to regular home loans.

1. Deduction under Section 24(b)

Under Section 24(b) of the Income Tax Act, 1961, you are permitted to subtract from the interest paid towards a top-up home loan. The maximum deduction allowed is up to Rs. 2 lakhs per financial year for self-occupied properties. This deduction can be claimed irrespective of the end-use of the loan amount.

2. Deduction under Section 80C

The principal repayment of the top-up home loan does not qualify for a separate deduction under Section 80C. However, if the funds are utilized for specific purposes, such as home construction or renovation, you might be able to deduct the principal repayment under Section 80C. The deduction limit under this section is up to Rs. 1.5 lakh per financial year.

You can secure your dream home with ease by availing of home loans from Homebazaar.com. Explore our flexible loan options and expert assistance to make your home-buying journey a smooth and hassle-free experience.

FAQs