A Top Up Loan is an addition to your existing Home Loan. If you need money for your home extension or renovation, then you can take an additional loan from the bank for the remaining tenure of your existing Home Loan. The interest rate of this loan is generally 1-2% higher that of a Home Loan.
Eligibility for Top Up Loan
It is mandatory to check your eligibility before taking a Top Up Loan. Below are the eligibility criteria:
- You must have an existing Home Loan in your name to take a Top Up Loan
- You can take a Top Up Loan only after the completion of six or twelve months or a pre-determined time period of repayment of the existing Home Loan
- You can apply for a Top Up Loan for only 70-75% of the property’s current market value minus the amount outstanding on your existing loan.
- The tenure of the Top Up Loan is the outstanding tenure of your existing Home Loan.
- It is important that you have a clear repayment history to apply for a Top Up Loan.
- You should have a particular minimum income pre-determined by the bank to take a Top Up Loan as it helps you to pay the EMIs.
Can You Afford a Top Up Loan over a Home Loan?
You might be eligible for a Top Up Loan, but you need to determine if you can afford it along with the Home Loan. You should apply for a Top Up Loan only if:
- You need urgent monetary funds to meet any specific personal requirement.
- You prefer to take funds for longer tenure at low-interest rates as compared to Home Loan rates.
- You already have an existing Home Loan or personal loan on which you have a clear repayment history.
- You want funds with minimal or no documentation.
Check your Affordability for Top Up Loan
Before you apply for a Top Up Loan, it is important that you check your affordability for this loan. You can check your affordability for a Top Up Loan with the help of an affordability calculator.
It is advisable to calculate the amount of your EMI in case of a Top Up Loan. When you take a Top Up Loan, you have to pay a single combined EMI for your existing loan and the Top Up Loan. The bank will re-calculate your EMI that you need to pay on the existing loan for the outstanding tenure and on the Top Up Loan as a whole. You can utilise the Home Loan EMI calculator to know how much amount you need to pay as EMIs.
The Bottom Line
Now that you know about the eligibility criteria and the affordability factors, you can easily approach banks if you are planning to take a Top Up Loan. Let the Top Up Loan help you to realize your dream rather than become a burden. All the best!