Home loan top-ups may seem like a lucrative offer given that the interest rates are lower and people are landing in a financial crunch due to the spread of pandemic COVID-19. The economy is crippled due to the lockdown and jobs are at risk. With companies laying off employees and implementing salary cuts, home-loan top-ups are attractive solace for financial worries and can provide relief in times of crisis.
Anyone who has a home loan can avail a home loan top-up. The value of the loan depends upon the credibility of the borrower, the market value of the property and loan repayment track record. The negative impact of COVID-19 on the real estate market has resulted in the lowering of the property value which lowers the sum of top-up loans that can be availed. A top-up loan requires technical and legal evaluation of the residential property, therefore, it cannot be availed during the lockdown period due to restrictions. But you can start to research and proceed with the process of application during this period and complete the inspection post lockdown.
A home loan top-up comes at an attractive interest rate, usually lower than the personal loans, gold loans or loan against property for the same credit profile. There is no restriction on the end usage of the money you borrow under the top-up loan. You can use the amount to pay education fees, investment in the business, medical emergency or any other financial obligation. The repayment tenure of such a loan is also longer compared to other loans. A top-up loan is offered at an interest rate 0.5-1% higher than the home loan and extends to the residential tenure of original home loan. In some banks, the tenure is as high as 30 years and a maximum amount of 2 crores is available for borrowing. Top lenders provide top-up loans only against completed residential projects and not against any under-construction residential property.
While a home top-up loan can help you meet immediate financial needs, a thorough assessment of overall costs is important before availing such a loan. One should be mindful of the EMIs, processing fees, interest rates, prepayment penalty and any other fees that a bank or financial institution may apply.