While home loans provide the majority of financial support to your home buying process, there are times when you need additional funds. After all, home buying is an extensive and expensive proposition. It does not end with paying the price of the purchased square feet. A substantial amount of your money gets exhausted for paying the registration fees, insurance, interior decoration etc.
According to the experts, the actual property involves a lot beyond the price of the property itself and that part is not covered by your home loan. So, what one can do in such situations? Well, you can opt for a top up loan on your existing loan.
What is a Top-Up Loan?
According to Mr. Gupta, the owner of a premium 2 BHK apartment in Rajarhat New Town, top up loans can save you from getting into hot waters if you are running short of money. It’s an additional amount that you can get as a loan on your existing home loan. However, you cannot opt for it simultaneously with the home loan. There’s a minimum qualifying period for which the original home loan should run, before you become eligible for the top-up amount. Usually the time-frame varies from six months to one year.
Tenure and Quantum of Top-up Loan
The tenure and quantum of the top up loan depends solely on the lenders’ discretion. Sometimes the lenders also put a capping on the aggregate of the proposed top-up amount. In that case, a certain amount is shown as top up, while the balance amount is added to the previously sanctioned amount of home loan. However, the availability of the top-up loan is subject to your eligibility and a sound credit score. Usually lenders check out your income status and a margin of around 25% to decide if you are eligible for an additional amount.
Unlike home loan, a top-up loan’s maximum tenure is restricted to 15 years, though the period of repayment varies from lender to lender. Some lenders also consider the residual value of the house to calculate the repayment period of the top-up.
Why should you opt for a Top up Loan & Not a Personal Loan?
This question might cross your mind that why should you not opt for a personal loan & go for a top-up loan during the requirement of additional funds. Especially when you can fetch a bigger amount from the personal loan, why not go for it? Let us tell you, a top- up loan is highly beneficial and do not impose unjustified pressure of repayment. You will get plenty of benefits by opting for it. A few of them are listed below:
- Get rid of additional mortgage: Top-up loans are disbursed over your existing home loan; hence, you do not need to provide documents and additional mortgage all over again. Whereas, with personal loans you have to provide the both.
- Funds can be used without preconditions: Depending on your requirements, top-up funds can be spent and the housing finance company will not take any responsibility to probe into the purpose. So, feel free to use the money as per your convenience. However, make sure to repay the loan on time.
- Low-interest rate: As mentioned earlier, personal loans and gold loans offer you bigger amount, but top-ups come with significantly low interest rate. The latter is offered on the security of the house. As a result, the interest rates are way lower than that of the personal or gold loan interest rates. It helps the repayment easier in the long run.
Having taken a home loan, often there are times when we are in desperate need of funds. That’s why top-ups are there. You can apply for it as soon as you fulfill the tenure of the ongoing home loan.