In case your home loan turns out to be insufficient in meeting all your financial requirements of your dream to build or buy a home, that is where you can apply for a top-up loan over and above your existing home loan amount. Here is a list of everything you need to know about home loans and the top-up loans.
What are Home Loans?
Home Loans are taken up for the purpose of purchasing a house. However, in some cases, the issue lies in the construction of a house or to renovate/rebuild your existing house for which also, these home loans can be taken up. When we talk about your home loan eligibility, it depends upon your source of income and the capacity of repayment that you hold. The more is your income; the higher will be the home loan amount that you can get approved. Most of the bank lenders tend to give easy approval to a loan amount of 80-90% of the principal monetary value of the housing property. While the residual amount of the principal value of the house, a sum of 10-20% is expected to be paid by the borrower from his source of income. The amount that a borrower pays is known to be “one’s own contribution”. Once a person is eligible for a hefty loan amount, he is still advised to make a good amount of down payment to the bank beforehand, so as to relieve their own pressure as this will result in the lowering of the Equated Monthly Instalment value.
What are the features of a Home Loan?
- The interest rates of home loans are quite reasonable and it can be easily negotiated with the bank or the financial institute which is giving away the loan amount.
- The affair of the loan application and the process of documentation is hassle-free and speedy.
- A small EMIs can also be chosen for a longer duration of the home loan.
- It also offers the ‘Balance Transfer’ feature which allows you to transfer your existing Home Loan from one bank to another.
- The provision of a top-up home loan can be offered on the existing home loan.
- Eligibility calculator tool and home loan EMI calculator tool that tells you the pre-approved amount and the EMI applicable on your Home Loan.
- If you are one of the few lucky customers, you may also get to relish the opportunity of pre-approved Home Loans.
What is a Top-Up Home Loan?
An existing home loan is eligible for the provision of getting another top-up home loan over and above the home loan amount. This loan if availed can be taken in use for various purposes like furnishing your house, renovation of your house, or as per an individual’s personal choice for their personal expenses.
What is the Top-Up Home Loan eligibility?
Anyone who has already taken a home loan is anyways eligible to apply for a top-up home loan. All you need to do as a borrower is apply prior for a top-up loan. The top-up loan amount is calculated based on the principal Home Loan amount and approved accordingly.
What is the Top-Up Home Loan interest rate?
The only middle ground between a personal loan and a top-up loan over and above a home loan is that both these loans are disbursed quite quickly. Also, both these loans require minimal number of documents. Both these loans also have some variations too. A specific difference between the two loans is that it paves one of the best interest rates- Personal loans tends to have a higher rate of interest due to its nature of being unsecured. On the other hand, for a top-up loan have a property which is pledged under the home loan which further makes the value of the property very cheaper.
The interest rate in top-up Home Loans varies between 8.70 – 9.55% per annum, whereas the Personal Loan interest rate starts at 10.50% per annum. Almost every banking and financial institution offers top-up Home Loan.
As far as top-up Home Loans are concerned, various renowned banks offer benefits such as – an amusing interest rate, less EMI, repayment tenure of up to 20 years, nominal documents and speedy
Due to these features of the top-up home loans, the loan policy becomes quite convenient as far as the customer’s point of view is concerned.
How does a Home Loan EMI Calculator calculate EMI?
The calculation of an EMI is done on the basis The EMI is calculated on the basis of the following features namely principal amount, interest rate & loan tenure.
The formula of Home Loan EMI calculation is:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1],
Here, E refers to EMI, P is for the principal amount that is borrowed from the bank & R denotes to the rate of interest every month added on the principal amount & N refers to the tenure of the loan. EMI or equated monthly installment, as the name suggests, is one part of the correspondingly divided monthly outgoes to clear off an outstanding loan within a stipulated time frame. The monthly EMI amount is static however, with the passage of time, you will pay less of interest & more of the principal amount.