A top-up loan is a provision that helps you to add a certain amount or topping up some amount in your existing home loan amount. Those who already have availed a home loan and make the loan repayment on time can apply for a top-up loan. Top-up loans are offered by the private as well as nationalized banks to their loyal customers.
Benefits and features of Top-Up Loan
Top-up home loans have many benefits such as-
Eligibility criteria for Home Loan Top-Up
Mentioned below are the eligibility factors that are required to apply for a top-up home loan-
The general criteria, which is the same as that of regular home loans, is as follows:
Note: Please note that the eligibility criteria may differ from one financial institution to another.
Documents Required for Home Loan Top-Up
Top Up Loan Calculator
When you apply for a top up on your existing home loan, you might remain in confusion about its repayment option. This is where you can make use of the top up loan calculator. This calculator will help you to know your monthly EMI payments on your top-up loan. However, when you avail a top up on your existing loan, you need to pay a single combined EMI for the existing loan as well as for the additional top-up taken on your present loan. Most of the financial institutions and leading NBFCs consider recalculating your top up loan EMI that you would be paying against your existing amount for the remaining tenure and the top up amount you have availed.
Tax Benefits on Top-Up Home Loan
Tax benefits on top-up home loans can be claimed if the loan amount is used only for construction, renovation, extension, or repair of a residential property. The maximum tax deduction of up to Rs. 30,000 can be availed if the loan amount has been used for a self-occupied home. If it has been used for a let-out property, then, there is no limit on the deduction. However, both come under the overall total tax deduction of Rs. 2 lakh per year that is available only on the interest component of home loans.
On the other hand, if the top-up home loan has been used for purchasing or constructing a new property, the principal and interest component of the top-up loan will be eligible for a tax deduction which is subject to the limit prescribed under Section 80C and 24 (b). However, if the top-up home loan is used for the renovation, alteration, or repair of residential property, the deduction can only be claimed for the interest component of the loan and not the principal component.
Therefore, it is important to preserve the receipts and documents of all the work done on the residential property with the top-up loan to claim the tax benefits on the home loan top-up.