A home loan balance transfer is when you switch the principal amount of your home loan to a new lender offering improved repayment options. There could be many reasons for which you choose to transfer your home loan, such as getting a lower home loan balance transfer interest rate or changing the repayment tenure of the loan.
You can also transfer your home loan to a new lender to get a top-up loan on your existing loan plan. Now, many borrowers transfer their home loans to new lenders to get more funds in the form of top-up loans. This is a great way to arrange for additional funding above your existing home loan. Moreover, getting additional funds over your home loan is a simple process.
All you need to do is, to keep repaying the primary loan for a minimum qualifying period. The period to be eligible for a home loan balance transfer usually lasts from 6 months to 1 year.
Get access to additional funds
Let’s say you opt for a home loan balance transfer. Your new lender will then check the market value of your mortgaged property and assess all the risks involved. In most cases, the amount of a top-up credit is within the range of 70-75% of the mortgaged property’s present market value excluding the outstanding loan amount.
There are many lenders out there that offer attractive top-up loan amounts on home loan transfers. Some lenders even agree to offer you a zero-processing fee on your home loan application. Also, you can now customise your home insurance policy to financially secure your family.
Benefits of going for a top-up loan
With a home loan, the amount is meant only for a specific purpose with restrictions. However, a top-up loan does not put any restriction on the borrower. With a top-up loan, you can use the amount for any reason you deem fit. You could use the amount for your personal or professional use, it is entirely your decision. Whether it is for financing higher education, funding a family occasion, buying household appliances, or any other expense, you can use the amount for anything you want.
You also get tax benefits through this loan if you use the credit to buy or construct your residential property. You can get up to Rs 30,000 as tax exemption on interest repayments. This can significantly reduce your financial burden. All you have to do is submit the required documents, which state that the funds you used were for these purposes. Please note that you cannot however use the funds received from a top-up loan for any investment purposes such as trading or buying stocks.
Top-up on the home loan or a new line of credit – which is the better option?
Some may wonder whether it is better to leave out the home loan as is and opt for a separate personal loan. If you are thinking about this too, you should know that going for a top-up is a better choice.
This is because the interest rate charged on the top-up loan is much lesser as compared to a personal loan since your property is already mortgaged with the lender. In addition to this, bigger amount is spread across a longer tenure, which means you also pay smaller amounts as monthly instalments.
This is why a top-up loan is considered a great option if you need to arrange additional funds. You should also use a home loan balance transfer EMI calculator to determine a suitable repayment plan.