Everyone knows what a home loan is but do you know how to top-up a home loan? A home loan top-up is almost like doing a top-up for your cellphone. If you want to know clearly about a home loan top-up, read the example below.
How to Get a Home Loan Top-Up?
A person got a home loan 3 years back and in between he struggled hard to arrange some funds for his emergency need. All his tries have gone in vain as he couldn’t get money for his emergency from anywhere though he has tried in all known ways. Since he has bought a home loan, he had walked in to the bank to pay back his EMI.
Being a prompt person in paying his EMI, the bank manager had a good opinion on this guy and asked him about his financial situation. This person has explained his entire situation that he has been trying for some money for an emergency. To his surprise, the manager has told him that he’ll be able to get additional money on top his earlier home loan. Within a few days, he got about Rs. 2 lakhs from bank. This amount what he got is called “home loan top-up”.
This comes as a great financial relief for those who have got home loan. Earlier when you got the home loan, it would have been granted based on your salary amount. By the time you keep repaying your home loan in monthly installments, your salary would also have increased. Additionally, the “house value” would also have increased a lot.
This home top-up loan helps to fulfill many emergency financial needs for those who have already bought a home loan. This loan is being provided by many banks and Housing Development Organizations exclusively. What are all the eligibilities, procedures and interests rates of this loan?
One should have paid the EMI at least for one year for the home loan that has been obtained earlier without any delay. Further, the top-up loan amount is decided based on the asset’s (house) current value, the person’s income increment on which the home loan was granted, the amount of repayment made till date etc. are being considered to finalize the amount.
About 80% to 85% of amount on the reevaluated value of the house could be finalized. From this the remaining payable EMI will be deducted and the rest will be granted as top-up loan. For example, say person has got Rs. 10 lakhs as home loan. Having paid the loan installments for 3 years, he is applying for a top-up loan. Now, the house value has increased to about Rs. 15 lakhs. Then, 80% of this amount is Rs. 12 lakhs. The repayable loan amount is Rs. 9.70 lakhs. In this case, he has the chances of getting Rs. 2 lakhs as home loan top-up amount.
To avail this loan, no huge document needs are required. It is enough if you have an application, the current income proof and your bank statement – it is easy to get a home loan top-up. You can also add-up and show your spouse and children’s income in the current income proof. The procedures will get over in about approximately one week time and the loan will be granted.
The bank will consider the home loan and the top-up loan separately. As long as you are paying the home loan, the same time can be acquired to repay the top-up loan too. This loan can be used for various purposes like, expansion of your house, buying furniture for your home, to buy computer, for your business expansion, to buy a plot or land, medical expenses, for your children’s educational or marriage expenses, or for your individual or personal needs etc. The interest for this top-up home loan will be 2% higher than your usual home loan. Can we get tax exemption on this loan?
Yes, you can get tax exemption on this loan on following circumstances where you really want to expand your house or build additional portion in your house. Here the interest will be same as your previous house loan’s interest. For this, you need to submit the permission plan of the expansion work to the bank. Further, the bank official will visit the house to see whether you are actually doing the expansion work in your house or not. With these conditions and procedures, you can get tax relief on home loan top-up.
If you get to know how to top-up a home loan, it would help you control your interest rates on other loans. In today’s circumstance, the interest rate for personal loan is 16-22%, land loan interest is about 13-15% and consumer loan interest is about 15-18%. So, if you are one who has already got a house loan and repaying it promptly, you can make use of this opportunity getting a home loan top-up as this loan is repayable with a maximum time of up to 15 years. When you analyze this genuinely and properly, you don’t have to end-up into troubles paying high interests on various types of loans. It will be a great financial relief during your emergency financial needs.