Top-up home loans: Tenure, interest rate, and other things to keep in mind when applying
Top-up home loans are a type of loan offered to homeowners who already have an existing home loan. This type of loan allows borrowers to borrow additional funds on top of their existing loan amount.
“By topping up your existing home loan, you can take advantage of the competitive rates offered by your current lender, saving you money on interest payments in the long run. With the potential to lower your overall borrowing costs and simplify your financial obligations, a top-up home loan is an affordable solution for managing your debt while keeping your budget in check," said Rahul Mehrotra, MD & CEO, RHDFCL.
Top-up home loans are most beneficial for customers when the applicant opts for the lowest tenure and prepays them. The tenure of the loan varies with the bank. For example, the State Bank of India gives a top-up home loan for up to 30 years.
Rahul Mehrotra, MD & CEO of RHDFCL, emphasizes the importance of carefully assessing the tenure and cost when considering a top-up home loan. Choosing the shortest tenure that aligns with your financial goals and repayment capacity is crucial.
The interest rates for top-up home loans are usually slightly higher than regular home loan rates. They also vary depending on the borrower's profile. For example, SBI's top-up home loan rates are between 8.80% and 11.30%, according to SBI's website.
“The interest cost of a top-up home loan is usually higher than a regular home loan due to the increased risk for the lender. The difference in the interest rate charged by financial institutions normally ranges between 1% — 2%," said Rahul Mehrotra.
If borrowers have paid for 12 months without missing a single installment, they are eligible for a home loan top-up. The amount of money a bank
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