The projected market size of India’s real estate sector is estimated to reach Rs.7,18,000 crore by 2030. This growth is well complemented by the demand for residential properties. In order to cater to the needs of potential home buyers, financial institutions provide them with the ease of availing home loans. However, housing loans does not accommodate every financial commitment of the borrower as they come with end-use restrictions. In order to meet additional expenses of the borrower including redecorating the house, medical emergencies, educational funding, he/she can avail a top-up loan facility.
What is a top-up loan?
This facility can be availed provided you have an existing home loan. Lenders offer this loan to those borrowers who have maintained a proper repayment schedule.
Financial institutions exercise this measure to prevent any potential default on the part of the borrower. Customers who opt for a home loan transfer facility can enjoy higher benefits including affordable interest rates in addition to flexible tenors.
There are various other ways you can benefit from a home loan top-up upon fulfillment of the eligibility criteria. They are as follows –
- No end-usage restrictions– Top-up loan funds can meet any of your funding requirements, personal or business. No compulsion is placed on the end-usage of such funds. Borrowers can utilize the amount wherever they deem fit, be it to fulfill travel, marriage or education expenses in addition to renovating their home.
- Tax exemption– Borrowers opting for a home loan top-up can benefit from certain tax benefits over their income under the Income Tax Act of India –
- Section 80C- This section specifies that you can claim up to Rs.1.5 lakh on your taxable income.
- Section 24(b) – This clause states that you can claim an exemption up to Rs.2 lakh on the payable interest. However, you must possess a self-acquired property for a period of at least 5 years to claim your tax exemptions. Failure to meet this requirement brings down the claim amount up to Rs.30,000.
- Affordable interest rates- Top-up loan interest rates are much lower and more affordable in comparison to personal loans. In case you are unsatisfied with the interest charged by your present lender, opt for a home loan balance transfer to avail lower top-up loan interest rates.
- Flexible repayment– Home loan top-up tenor is longer as compared to most other unsecured loans. Tenor options provided to borrowers depend on various factors like borrower’s profile, lenders’ policies, age, net income, and property value.
However, it should be kept in mind that the absolute interest pay-out increases with a longer tenor. If the borrower has substantial funding available on his/her part, he/she can choose to pay additional funds over and above the EMI or the repayment schedule. The surplus amount will not only reduce the total outstanding principal amount but also help avoid the payable interest on it thereby decreasing the total interest burden.
In order to select a repayment schedule as per convenience, borrowers may use a top-up loan calculator.
- No extra documentation– Top-up loan is provided over and above your existing housing loan, therefore you are not required to furnish additional documents for approval.
Upon verification of your repayment capacity, the financial institution allows you to meet your urgent monetary needs easily. Availing a home loan top-up, therefore, is easy and hassle-free provided you fulfill the above-mentioned eligibility criteria.