If you need more money to decorate your house you bought with a loan taken from a bank, you can opt for a top-up loan. This is a special type of a loan provided by the bank you have taken the home loan from, provided you have already started to pay the EMI of your existing home loan to the bank.This will meet with your need for more money to decorate your home.
- However, just like any other loan that you wish to take out from a bank or any other financial institution there are a few eligibility criteria that you should look into and fulfill to get this top-up loan.
- In addition to that, you should also look into the tenure of such loans and how exactly you can obtain it from your bank.
With such knowledge, you will be able to make the right choice and make sure that you are comfortably able to carry on paying both the EMIs for your home loan as well as your home renovation loan at the same time along with any other loans that you may have with the same bank or any other banks, financial institutions or online sources such as Libertylending.com and its likes.
Reasons to take out such a loan
There are lots of good reasons to take out a top-up loan for home decoration from your bank rather than any other private money lender.
- Ideally, just like any other person, when you buy a property it will generally involve buying it with a home loan.
- In addition to that, you may also have exhausted a substantial amount of your savings in order to pay for the margin money.
- Moreover, most of the home buyers usually try to get the maximum possible amount as loan from the banks in order to buy the best home possible.
Sometimes, in such a situation it may so happen that you will be in need of a considerable amount of money for an upgrade in your home while you are also paying the EMIs for your existing home loan. This is when you will need a ‘top-up home loan’to deal with such situations and find it to be extremely useful as well.Given on the security of your house, the rate of interest is lower than that of a pure personal loan.
About top-up loan
Before you look out for the sources to avail a top-up home loan, you must first understand what exactly it is and when you should apply for such a loan.
A top-up loan is typically the additional amount of money paid to you as a loanover and above your existing home loan. There are several lenders that offer such loans.
- They usually have a minimum qualifying period to avail such a loan and through which your existing home loan should have run. The period that will make you eligible for the top-up home loan may normally vary from six months to a year.
- Apart from that, the lenders also usuallyassert that the house for which the original loan was taken out, be completed.
You will also need to have a very good and strong credit score and repayment track record of your existing home loan for availing a top-up home loan. Otherwise, when the existing home loan is already at stake, the lender will not feel comfortable or be willing to commit any further loans to you.
Well, in such a situation, all hopes and roads do not come to an end. If your existing lender does not want to give you a top-up loan, there are always other money lenders whom you can approach to. They will be more than happy to transfer your loan to their accounts and along with it give a top-up loan. This will increase their customer base as well as business profits.
In such a case however, you will need to comply with all their requirements, provide all necessary documentations and abide by the KYC formalities of the new lender.
Amount and tenure of the loan
You will also need to know the amount of loan that you may get as well as the tenure of the loan through which you will need to make the payments. This is because it will help you to make a proper plan to deal with your debt or debts.
Typically, situations may change after the original home loan is disbursed such as:
- Your income may have increased and
- The value of the property may have appreciated as well.
Both these factors will play a significant role in appraising your overall credit and eligibility for getting the loan.
As for the amount of top-up loan that you may get will differ largely on the lending policy of the lender.
- There may be a few lenders who may cap the aggregate of your proposed top-up loan. They may also balance the outstanding on your existing home loanto the initial amount that was sanctionedsubject to the requirement of the margin money as well as the level of your income.
- On the other hand, there may be a few money lenders who may follow an entirely different approach to evaluate your overall loan eligibility. They may take into account your current income and even lower the percentage of the margin money as well based on the prevailing market value of your home.
When it comes to the tenure of the top-up loan, just like any other loans, its tenure may also vary according to your eligibility and from one lender to another. However, most of the banks and financial institutions offer this type of loan for a maximum of 15 years, though there may be several lenders who may restrict the loan term to the remaining time period of the existing home loan. They do this just to ensure that both the payment of the original home loan as well as the new top-up loan is received and completed at the same time. The residual life of your house may also determine the maximum term of your top-up home loan.
Contributed by Kelly Wilson