Have you availed of a home loan to fund your biggest dream? Well, there can be no doubt that the prospect of having a house of your own is exciting in itself and you’re certainly doing your best to make timely repayments. However, life often has its way of changing the course of our plans. What if suddenly down the road, you’re running low on funds or require more funds over your existing home loan? For such times, special offerings are provided by lenders – home loan balance transfer and home loan top-up.
1. What Is a Top-Up Loan?
Ahome loan top-upis sanctioned by a lending institution as an add-on over and above your pre-existenthome loan. Think of it as topping up your mobile balance when you start running low. You can avail of a top-up loan with your old lender or can switch to a new lender as they may provide a lower ROI.
2.What Is Balance Transfer Home Loan?
Ahome loan balance transferallows you to switch lenders for a better ROI on your current housing loan. Imagine you availed of ahome loanat 11.1%, but soon realised that a lending institution is offering youhome loan interest ratesat just 9.05%, what do you do? You refinance and take a new balance transfer home loan. You can also make the switch if your current lender provides you with poor customer service.
3. What Is the Difference between the Two?
| Balance Transfer Home Loan | Top-Up Loan |
| This type of loan can lower your ROI on your current home loan. It can be used for buying a house and nothing else. | These end purpose of this loan is open-ended, meaning it can be used for any purpose. For example, Nidhi will use it to fund her wedding. |
| A home loan balance transfer can occur only after 12 successful EMI payments with the previous lender. | Top-up loans can be availed at any time during your loan cycle. |
| You can use this feature to further optimize your home loan tenure. It may be a good idea to reduce your tenure with the reduction in your ROI. | Top-up loans are sanctioned for the remaining duration of your existing home loan, or a maximum period of 10 years. |
| Home loans are sanctioned for 80% to 90% of the total property value. | top-up loans cannot exceed 70% to 75% of the estimated market value of the property minus the outstanding home loan amount. |
Additional Read:- Process of Balance Transfer Explained
4. Eligibility Criteriafor Balance Transfer and Top-Up Loans
| Balance Transfer Home Loan | Top-Up Loan |
| You can switch lenders for a better ROI only after successful payment of 12 EMIs on your current home loan with your present lender. | You are eligible to apply for a top-up loan only after 3 months of home loan disbursem*nt. Most financial institutions sanction a top-up loan of Rs. 1 lakh if you have paid only 3 EMIs on existing home loan. |
| Your property must be in your possession, and it should not be under construction or renovation. | Top-up loans are sanctioned only after checking the applicant’s repayment history on their current home loan. |
Additional Read:- What are the Documents Required for a Home Loan Balance Transfer?
So, you see, how both home loan balance transfer and home loan top-up are provisions to ensure all your housing finance needs are covered; one makes your home loan more budget-friendly while the other functions towards expanding your budget for covering additional requirements.
Do you wish to avail the benefits of these unique product offerings? Turn to Tata Capital for all your housing finance needs. We recommend you check your home loan eligibility with the help of our home loan eligibility calculator. Such a home loan calculator allows you to optimise your monthly EMIs. To know more, get in touch with us today!
