Advantages and Disadvantages of Home Loan Top-up

A top-up loan is one of the best ways to raise money with a low-interest rate to fulfill your immediate or long-term financial needs. As long as you have an excellent credit score and pay your EMIs regularly, the banks are more than willing to give you a top-up loan. Whether you need it for renovation, construction, or an emergency, you just need to apply for home loan top-ups, and you will get the money in your bank account within 2-3 days.

But before you apply for a top-up loan, you need to understand the advantages and disadvantages of this loan facility to get the best house loan top-up possible. In this article, we will show you what a top-up loan is, its eligibility criteria, and much more. Let’s dig in.

What Is a Top-up Home Loan?

A top-up loan is an additional loan amount that can be sanctioned over a current mortgage. Banks and other financial organizations often offer this type of loan to their existing housing loan customers, who have a track record of timely EMI payments for at least 6-12 months. 

The tenure of the top-up loan depends on the remaining tenure of the overall mortgage. People often raise this loan to deal with their financial bottlenecks. The amount of money you can raise via a top-up loan varies depending on your bank or financial institution. However, the addition of the amount of the top-up loan and the amount of your outstanding mortgage usually doesn’t exceed 80% of your property’s total market value.

Eligibility Criteria to Apply for Housing Loan:

Here are a few general criteria you need to fulfill to raise a top-up loan over your current mortgage:

  • You need to pay your home loan’s EMI for at least six months (Or 12 months, depending on the financial institution). 
  • You must not have more than one EMI bounce in your last 12 months’ bank statement.
  • If you had an EMI bounce, the pending EMI has to be cleared before the next due date.
  • Your age must be between 21 and 65 years.
  • Your nationality status must be Indian or Non-Resident Indian.
  • You should have a salaried job, or you need to be self-employed.

How to Apply for a Top-up Housing Loan?

The application process for your best home loan top-up can vary depending on the financial institution. Some banks require their customers to complete at least six months of the loan repayment before they can sanction a top-up loan. Meanwhile, other banks might need you to complete at least 12 months of loan repayment. However, in both cases, you need to be a regular paying customer of the bank with a good credit history.

Once you successfully meet the criteria to make an application for housing loan top-ups, you need to fill up a loan request application, which will be provided by your bank. Your bank would also need your latest bank statement, salary slips, or income tax return records. Once the bank sanctions the loan, you will get the amount in your bank account within 48-72 hours.

The Advantages of a Top-up Loan:

1) No Spending Limit:

You can spend the top-up loan amount in any way you want. You can renovate your house, create a parking space, buy furniture, or even a car. No one will care, even if you buy a set of jewelry with your top-up loan money. In other words, there’s no limit on how you spend the loan money.

2) Low-interest Rate:

The top-up loan has a noticeably low-interest rate when you compare it to the standard interest rates of a personal loan. You can get an instant home loan top-up from your bank with an 11-14% interest rate as long as your loan request is approved. On the other hand, the interest rate for a personal loan may go up to 22 percent.

3) Faster Processing:

Since banks offer top-up loans to existing house loan customers, you can complete the entire application process within a couple of hours and get the loan amount within 2-3 days. This is an easy, quick, and hassle-free process that requires no tedious paperwork on your part.

4) No Mortgage Required:

A top-up loan doesn’t require you to offer any additional property as security. As long as you pay your EMIs on time and fulfill the eligibility criteria, you can get a top-up loan without mortgaging any additional property.

Disadvantages of a Top-up Loan

1) No Tax Benefits:

If you have raised the top-up loan for personal needs, you will not get any additional tax benefit. You will get a tax benefit only if you use the loan amount to renovate your house or use it for other construction purposes.

2) Only Available to an Existing Customer:

You can apply for a top-up loan only if you are already a housing loan customer of your bank. And you can get the top-up loan only from the bank you have taken the mortgage loan from. Plus, if you have a poor track record of monthly loan repayment, you cannot get this facility from your bank.

3) You Repay More:

Most people often repay their top-up home loan by spreading it throughout the remaining tenure of their mortgages. While you may need to repay less money every month this way, you end up paying way more money to your bank because of the extra interest and additional fees.


A top-up loan allows you to raise money over an existing house loan to take care of your financial bottlenecks. As long as you have a good credit score and you pay your EMIs on time, you will be able to get a low-interest top-up loan with ease. However, just like every other thing in the financial world, this kind of loan also has a certain set of advantages and disadvantages. So, take a look at the pros and cons and weigh your options properly before you apply for home loan top-ups.

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