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Don’t take a top up loan and spend it only on the construction work of the house. This loan can also be used for other personal needs. Whether it is urgent financial needs, paying medical bills, buying furniture, children’s fees, planning to go for a car, vacation or need funds for your children’s weddings, you can try a top-up home loan. When you are looking for a loan- term loan, a top-up home loan is a good idea if you don’t want to mortgage a new property to refinance an existing home loan. This is one of the most convenient ways for homeowners to raise money.

Benefits of taking a top-up home loan.

No additional documents are required for a top-up loan as the bank is aware of the borrower’s creditworthiness due to the existing home loan with easy eligibility criteria. Borrower should have documents like IT return, identify papers, photographs etc. At the time of applying for a top-up loan, the existing home loan must have accurate repayments. Banks generally allow top-up home loan to borrowers in the age group of 18-70 years.

There are no restrictions on the loan usage.

Just like a personal loan, a gold loan, a borrower has the freedom to use a top-up home loan as per their needs. Your financial needs can be used. However, a home renovation loan should be used only for home construction purposes.

Loan Repayment period 

Longer is the time required to repay a home loan. In the options like gold loan, personal loan, loan against property, banks generally give a maximum loan repayment period of one year to Five years depending on the terms and conditions of the bank. However, the tenure of a top-up loan depends on the tenure of the home loan. Example. If the tenure of the home loan is 20 yrs, you can get a maximum tenure of 20 years for your top-up home loan subject to bank conditions.

An additional borrowing option is that

You can try for a top-up home loan with an overdraft (OD) facility on home loan top-up. The interest rate on a home loan top-up with OD facility is slightly higher than the interest rate on a normal home loan. But, the interest rate of personal loan is lower. You also get the benefit of long-term liquidity availability. So, top-up home loan with OD facility is very useful in this sense.

Low Interest Rate

The interest rate on top-up home loans is slightly higher than the home loan interest rate. Interest rates on these loans start from 7.40% for those with better credit scores. Hence top-up home loans are one of the cheapest loan instruments. Processing fees may be up to 1%.

Tax Benefits

You can claim tax benefits on top-up home loan if the loan is used only for construction, renovation, extension or renovation of the residence. If the loan is availed for self-occupied house, then maximum Rs. 30,000 is tax exempt. There is no limit on exception if the loan is availed for rental property. But both of these also charge interest portion of home loans per annum of Rs. 2 lakhs will come under tax exemption.

If the top-up loan is utilized for purchase or construction of new property then the principal interest portion is eligible for tax deduction subject to the limit prescribed under sections 80c, 249b0. But if the loan is used for residential renovation, alteration or repair, exemption can be availed only for the interest portion of the loan. It is important to preserve receipts and documents of all works done on residential property with top-up loan to claim tax benefits.

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