Top-up Loan

Planning for renovation, it’s time to invest in top-up loan if you already have a home loan or personal loan.

Home loans are best way to make sure that you become the owner of your dream house. But what if you wish to renovate your house; suppose you had taken the home loan of Rs. 50 lakh for a tenure of 15 years and after paying your EMIs regularly your outstanding amount is 35 lakhs and you plan to renovate your house but due to lack of funds you are not able to do so. But, not to worry, banks and many financial institutions now have the provision of top-up home loan which will help you solve your problem of shortage of funds.

What is a top-up loan?

A top-up home loan allows you to avail loan on top of your home loan amount. Usually the tenure of the top up home loan is 10 years; you can get top-up home loan only after a few years of your home loan disbursal thus, you need to make sure that you are paying your EMIs regularly which is an indication of good credit rating, this also gives a good reflection of repayment track records and hence, increases your loan eligibility.

The Working of Top-up Loans

The logic behind top-up loan is that the financial institutions sanction the amount on top of your already approved home loan, this facility can be availed only after a certain year of home loan disbursal, however, few conditions apply for top-up loan approval :

  • The borrower must have taken home loan from the bank where he/she wants the top up loan.
  • One can get a top-up loan only after 6 months or 1 year or after certain years of repayment of the home loan. However, some banks also have the provision of completion of the house before approving the top-up loan.
  • Financial institutions usually approve the top-up amount which is 70%-75% of the current value of the property minus the outstanding amount of your home loan. For example, if the market value of the property is 60 lac and 30 lac is the outstanding amount of your home loan then the top –up loan amount that the financial institution can approve is 15 lacs to 18 lacs.
  • An important point to note here is that the tenure of the top loan cannot be more than the tenure of the outstanding home loan amount. For example, if the tenure for an outstanding home loan is 6years then banks will approve the top up loan for not more than 6 years.
  • Usually, there are no extra security charges for a top-up loan.

The above-mentioned conditions may vary from bank to bank.

Similar to home loan, there is an interest rate at which banks approve the top-up loan , this varies in the range of 1%-2% more than the interest rate of home loan. Although top-up loans comes with extra interest rate yet they are less expensive when compared to the personal loan.

Here is an example to explain how the top up loan is calculated:

Let’s say, Vasu had taken home of Rs. 30lac at interest rate of 12% for a period of 20 years and he is in the third year of home loan.

Now let’s assume that the value of the property has escalated by 20 lac and now the value of the property is 50 lac.

70% of Rs. 50 Lac = Rs. 35lac

Now,the outstanding amount has to be deducted from the above amount.

Vasu had paid loan for 3 years then he woud hav paid 1.31 lac.

Now the remaining principal amount is 28.7L

Top Up loan = 70% of market Value- Principal yet to be paid

35 lac- 28.7 lac = 6.3 lac

Hence, maximum top-up loan Vasu can get is 6.3 lac.

List of banks and financial institutions and the interest rate charged by them on the top-up loan:

Name of the Financial Institutions Interest Rate for To-up Loan
SBI 12.45%-14.95% (Fixed)
CITI Bank 11.49%20% (Fixed)
ICICI 11.49%-18.49% (Fixed)
IDBI 13.20% (Floating)
Indian Overseas Bank 14% (Fixed)
Standard Chartered 11.99%-17% (Fixed)
Kotak Mahindra 11.49%-20.5% (Fixed)
Allahabad Bank 13.55% (Fixed)
Bank of Baroda 14% (Fixed)
Bank of Maharashtra 15.15%(Fixed)
Bank of India 12.60%-14.60% (Floating)
Canara Bank 13.65% (Floating)
Union Bank 14.4% (Floating)
Yes Bank 14% (Fixed)
Aditya Birla 14%-16.25% (Fixed)
Capital First 13%-20% (Fixed)
Fullerton 17.25%- 37%(Fixed)

Our Role: Loanyantra is an online platform which will help you find out the right place to avail home loan and get assistance in top-up loan. Our one-one interaction methodology and association with various financial institutions keep you updated with all the information related to home loan services. To know more about it, get connected with us today.



Home Improvement Loan Vs Top-up Loan

Home loan is a crucial one when you go for your dream home.

It is always important to beautify your home to add more happiness. For such kind of necessities, you need to work on your financials again after paying the down payment and after you start your EMI for your home loan. Home Improvement Loan is one such loan to fulfill all your needs.

The interiors of your house reflect your personality and to constantly upgrade it in terms of looks and convenience, all the banks and housing finance companies provide Home Improvement Loan.

Home Improvement Loan covers-

  • Complete renovation of already owned residential property
  • Upgradation
  • Repair of your house/flat
  • External & internal repairs/paint
  • Water-proofing & roofing
  • Tiling and flooring
  • Plumbing & electrical work
  • False ceiling & woodwork (fixed to the building)

What you should know about Home Improvement Loan :

  • The rate of interest usually is same as for home loan.
  • 80% of the property value is the maximum amount valid for home improvement loan.
  • Repayment period is same as for home loan.
  • You can repay the loan even before the tenure but check for repayment fees.
  • You can claim tax deduction when you are in home improvement loan. Both the co-borrowers can claim deduction.
  • Banks do not provide home improvement loan for a property which is older than 35 years.
  • Pay processing fees.

There is also an extensive range of home loan products like Home Purchase Loans, Home Construction Loans, Home Extension Loans, Home Improvement Loans and Plot Loans.

Home Improvement Loan vs Top up Loan. Which is better?
Home Improvement Loan vs Top up Loan. Which is better?

One will always think of top-up loan when in need of money.  Top-up loan is used when there is an immediate financial need. It is always recommended to go for a top-up loan if you are already in a home loan.

Everybody aims for a higher growth. For the steps to go forward in life, you might need a lump-some cash anytime. For such reasons exists, top-up loan on home loan.

Top-up Loan covers :

  • House renovation
  • Medical
  • Marriage
  • Education
  • New investment
  • To repay any other debt

What you should know about top-up loan : 

  • You can avail top-up loan only if you have an existing home loan.
  • The rate of interest usually is 0.5% – 1.00% more than the home loan interest rate.
  • 80% of the property value is the maximum amount valid for top-up loan.
  • The eligibility is based on your credibility and other loans.
  • Repayment period is same as for home loan.
  • You can repay the loan even before the tenure but check for repayment fees.
  • You can claim tax deduction when you are in home improvement loan. Both the co-borrowers can claim deduction.
  • Need to pay processing fees.

Everything is similar when you compare home improvement loan and top-up loan. If you have to choose one, give yourself the ratings for both the loan types based on the interest rate. Also, if you foresee any future financial necessity other than home renovation, it is better go for a home improvement loan when you are in need of any home remodeling.

Loanyantra helps you build the bridge between you and banks/financial institutes. To get a hassle-free guidance and home loan help, we are just a missed call away. Plan your loan well and close it early. Invest more and earn more.


7 things you must know about top-up loan on home loan

What is a top-up loan.

A top-up loan is a loan given on an existing home loan. 

Infact, a top-up loan is an incremental loan on an existing home loan given to the existing customer at a current ‘rack rate’ of  the home finance company or bank. The rack rate is usually 1-1.5% higher than home loan rates.

1. Who is eligible for top-up loans.

top-up loan on home loan

The top-up loan is available for only the existing customers. The customers should have done atleast 6 or more repayments and should have a good track record of repayment.

2. How much top-up can you get.

It varies from lender to lender. 

  • Some  have a cap, say, they look at the current price of your property less the amount of home loan you owe. For e.g., Your property costs 60 lakhs and you got 80% loan at 10% interest. Then the loan amount is 40 lakhs. Supposing you repayed for three years. 

Then the top up is provided on (The amount of the initial home loan) – (outstanding principal amount). 

  • Some provide amount up to 100% of the original home loan. Like Standard Chartered, HSBC, Citi Bank, ICICI Bank.

3. Tenure

The tenure of the top-up loan can go up to 15-20 years, depending on your home loan’s term. As it is offered only to existing customers, the maximum tenure could be the same as the balance repayment period. 

4. Interest Rate

The interest rates are relatively higher when compared with home loans and lesser than the personal loans. Usually it is 1.00% to 1.50% higher than the home loan interest rate.

5. Fees

Banks usually charge a processing fee that is the same as that on their home loan offering. If you have been a good home loan borrower, which means you have paid your instalments on time and have a favourable credit report, the fees may even be waived by some banks.

6. Why Should you Opt for a Top-up loan / Advantages

  • If you are in urgent need of funds, like for education or child’s marriage or even if you want to renovate your house or furnish it, top-up loan is the best solution.
  • Compared to other alternatives such as personal loans, a top up gives you a better deal when it comes to interest rates and processing fees, so you can leverage your existing home loan to help you save costs
  •  A Top Up Loan allows you to repay over a longer tenure compared to a personal loan, helping you to keep your monthly outflow low.
  • The process is simple, quick and hassle-free as the documentation is already done earlier. 
  •  It does not require collateral.

7. Disadvantages

  • It is not approved for those who have a poor track records of repaying the loan.
  • It is the bank’s discretion to approve the loan and the number of EMI’s to be repaid before being eligible for getting the top loan.
  • Not all the banks have this option. 

              So you have an option to transfer your home loan to another lender and get a top-up loan. 

Hence, when you weigh the advantages and disadvantages, it is obvious that opting for a top-up is the best. The purpose may be anything either renovating your home or medical expenses or any emergency needs.There are banks who disburse top up loans equivalent to that of home loans while some have a cap on the amount being lent. Some banks may ask to mention the reason for top-up loan just to avoid illegal usage. So a careful and detailed research is to be done, on your purpose of top-up, as well on the banks you can consider, before going for a top-up loan.