The total loan amount should not exceed 70 per cent of the market value of the property.
You can also take a top up loan only after a few months of taking a home loan.
The interest rate on top up loan should not be less than your home loan rate.
New Delhi. Taking a home loan to build or buy a house is the easiest and most popular option. Most of the people take home loan to fulfill their dream of home. It is considered to be the safest and cheapest among all types of loans. But, what can you do if you need some more money even after the home loan?
Experts recommend top-up on home loan instead of taking personal loan for this. Actually, a home loan is a long-term loan and banks are comfortable with it, so that they can also give you an additional amount in the form of top up if needed. However, for top up it is necessary that you have already taken a home loan.
how much money can you get
Ashwini Rana, founder, Voice of Banking, says that the total amount including home loan and top-up should not exceed 70 percent of the market value of the property. However, this calculation may vary from bank to bank. You can apply for a top up loan only after a few months of taking a home loan. It would be better if you first apply for a top up loan in the same bank from where the home loan is running. If this facility is not available in that bank then you can apply in any other bank also.
What will be the interest rate and tenure
Home loan is taken for a long tenure and you can also take top up on it for a longer tenure of 10 years. The condition for interest on top up loan is that its rate should not be less than your home loan rate. However, on an average, its interest rate remains around that of the home loan. Hence, it is much cheaper than a personal loan. Some banks also offer overdraft facility on top up loans, but it is not available for loans below 20 lakhs and more than Rs 2 crores.
Where can I use the amount
You can use the amount received as a top up on a home loan for home repairs, furnishings or its extension. Apart from this, you can also use this amount for your child’s education. Many banks do not impose any obligation on the use of the top given on the home loan, so that you can use this amount as per your need wherever you want.
Tax exemption also benefits
Like the home loan, you also get exemption from the Income Tax Department on its top up loan. Under Section 80C of Income Tax, you get an exemption of up to Rs 1.50 lakh annually on the principal repayment of the home loan. At the same time, tax exemption of Rs 2 lakh is given annually on interest payment under 24B. If your home loan limit does not exceed this exemption, you can avail tax exemption up to the specified limit by including the principal and interest paid on the top up loan. Even if you have not used that amount for the education of children.
FIRST PUBLISHED : August 04, 2022, 15:03 IST