NEW DELHI: A top-up on a home loan is a convenient way to raise money. The borrower has a property already mortgaged with the bank, and all that is required is asking the lender to top up the loan.
If borrowers have paid money for 12 months without missing a single installment, they are eligible for a home loan top-up. The amount of money that a bank will sanction depends on the number of equated monthly instalments (EMIs) paid.
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For example, after 12 EMIs, the lender may sanction 10% of the original home loan. After 24 EMIs, the borrower could be eligible for 20% of the home loan. The limit varies with each lender.
There are a few things that borrowers should know when taking a top-up on home loan.
1. Applying for a top-up home loan involves documentation. For some banks, the process is similar to taking a home loan – a borrower will need to submit home-related documents, proof of address, identity, and income.
2. The tenure of the loan varies with the bank. For example, the State Bank of India gives a top-up home loan for up to 30 years, whereas Indian Bank offers it for up to 10 years. Some banks like Bank of Baroda decides the loan amount based on the tenure based on the borrower’s age.
3. The interest rates could be slightly higher than the home loan rates. They also vary depending on the borrower’s profile. For example, top-up home loan rates for Axis Bank starts at 8.65%. For SBI, it’s between 7.50% and 9.80%, according to data from Paisabazaar.com.
4. There’s also a limit on the maximum amount that the lender would be willing to sanction. SBI, for example, has no limit. For Indian Bank, the limit is ₹60 lakh, and for Axis Bank, it’s ₹50 lakh.
5. If you are taking a top-up home loan for repairing or refurbishing your home or constructing an additional room, you can also get tax benefits.