People who have availed themselves of a home loan can borrow a second loan against their home's equity. These loans are known as home loan top-ups and they are popular for several different reasons. In this brief guide on top-up loans, we discuss the importance of top-up loans, the reasons that make these loans a popular choice and situations when borrowers should consider availing themselves of a home loan top-up.
Home Loan Top-ups: Benefits
1. Low Top-up Loan Interest Rates: One of the reasons why home loan borrowers must consider availing themselves of a top up loan is that these loans attract low top-up loan interest rates. The interest rate on top-up loans is only slightly higher than the home loan interest rates. These low interest rates are one of the key reasons why home loan top-ups are becoming so famous lately.
2. Flexible End-Use: Compared to other loans, home loan top-ups come with flexible end usage. You can use the funds to meet your housing-related expenditures.
3. Long Repayment Tenor: Yet another benefit of a top-up loan is that these loans come with a long repayment tenor. The tenor for a home loan top-up is the same as the tenor of your home loan. So, if you have 15 years to repay your home loan and you avail yourself of a top-up loan, you can take up to 15 years to repay your loan. This is a long time, which translates into comfortable and economical EMIs.
4. High Substantial Loan Amount: Under home loan top-ups, many home loan lenders sanction loans as high as Rs.1 Crore. This loan amount is high enough to cover most of one's obligations and even consolidate one's debt, which is one of the key reasons many borrowers avail of top-up loans.
When Should You Consider Availing Yourself of a Home Loan Top-Up?
When people buy a home, they usually never take into consideration important expenses, such as the interior cost. Many people undertake interior decoration and refurbishment projects a few years after availing themselves of a home loan. Unfortunately, a lot of the time, home loan EMIs leave borrowers with no scope for more expenses. In such a case, availing oneself of a home loan top-up may be a good idea. Availing yourself of a home loan top-up is also a smart option when you need funds to take care of a medical emergency, start a business, pay a child's college fee or invest in another property. However, if you are planning to avail yourself of a home loan top-up, do so only when you are financially prepared for the added burden. When you avail yourself of a home loan top-up, your loan EMI will go up and can become difficult to repay if not planned well. Borrowers must also negotiate for a low top up loan interest rate to keep their new loan EMIs as affordable as possible.
How to Apply for Top-up Loan on Your Home Loan?
If you want to avail yourself of a top-up loan on your home loan, there are two ways to do so. First, you can ask your current lender to sanction you a home loan top-up. If your current lender agrees, well and good. However, if your current lender denies your request, your other option is to apply for a home loan balance transfer and avail of a top-up home loan through that. Home loan balance transfer is the process of transferring one's remaining home loan balance from one's current lender to another willing to refinance the loan on better loan terms and conditions. When one avails themselves of a home loan balance transfer, they are given the option of availing of a home loan top-up provided they meet the qualifying criteria.
In short, a home loan top-up can make things easier for you. However, these loans must be availed of only when one is ready for them.
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