Have you ever used a home loan to fulfill a lifelong dream? There is no doubting the excitement associated with the prospect of house ownership, and you are making every effort to make your payments on time. But sometimes life has a way of changing our plans. What happens if you unpredictably run out of money or require more money than what your present mortgage would cover? For such events, lenders offer special offers, such as home loan top-ups and balance transfers.
What is a top-up loan?
An extra to your current home loan will be approved by a lending institution as a top-up.
If your present lender offers a lesser ROI, you can switch or apply for a top-up loan with them.
What is a home loan with a balance transfer?
You can switch lenders with a home loan balance transfer to get a better rate on your current mortgage. What would you do if you obtained a mortgage at an interest rate of 11.1% but soon learned that a different lender was providing you with a loan at just 9.05%? With the balance transfer, you refinance and take out a new mortgage. You can switch lenders if your current lender’s customer service is inadequate.
The end use of this loan is open-ended, meaning that it may be applied to any purpose. At any time throughout your loan cycle, you may submit an application for top-up loans. Top-up loans are authorized for a period of up to ten years, or for as long as your existing mortgage is still due. Top-up loans are limited to 70% to 75% of the estimated market value of the property, less the remaining balance of the primary mortgage.
You are only qualified to transfer lenders for a better ROI if you have successfully repaid 12 EMIs on your current home loan in India with your present lender.
Only three months after your home loan has been disbursed can you apply for a top-up loan. Most financial institutions would provide you with a top-up loan of Rs. 1 lakh if you have only paid three EMIs toward your present home loan.
You can see how the two choices—home loan top-up and home loan balance transfer—each ensure that your housing financing requirements are satisfied. The former helps you boost your budget to cover additional expenses, while the latter makes your mortgage more budget-friendly.