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Home Loan

How does a Home Loan Top-Up work – A complete guide

Summary: Explore how does home loan top up works, eligibility criteria, documents required & benefits. Read on to know.

05 Nov 2021 by Team FinFIRST

Life is ever-changing, and your needs are constantly expanding. Thankfully, there are readily available loan options to cover these growing necessities. One of these, the home loan, can be the perfect way to cover the expenses of a home. However, if you go over your budget and need more funds to furnish, renovate, or decorate your house, you can opt for a home loan top up. This is different from applying for a second loan and can offer you a lot of ease and convenience. Find out more about the top up loan meaning and other aspects.

What is top up loan?

A top up loan is offered on an existing loan if you require excess funds. The process of buying or constructing a home can be intricate. It can involve multiple costs. If you cross your initial estimate, you do not necessarily have to apply for a new loan. Instead, you can apply for a top up loan. This way, the lender disburses more funds within the same loan. As a result, there is no need to initiate a new process for approval. The turnaround time is shorter, and you enjoy greater flexibility and liquidity to use the money. The home loan top up interest rate is also competitive, making it an ideal option.

What are the Home Loan top up eligibility criteria?

Here are the criteria to qualify for a top up loan:

  • Individuals between the ages of 21 and 70 can apply for the top up
  • The minimum income for salaried individuals is Rs. 1 lakh per annum
  • The minimum income for self-employed individuals is Rs. 1.5 lakh per annum
  • Individuals must be resident Indians only
  • The loan applicant should not have more than one EMI (Equated Monthly Installment) bounce six months before applying
  • The applicant should have paid the primary home loan EMIs for at least nine months
  • In the case of a balance transfer from another bank, you need to provide at least one year's repayment history



What documents do you need to apply for a Home Loan top up?

In most cases, the loan provider may not ask for any documents as you would have already submitted the relevant ones when applying for the original loan. However, it may still be advised to keep the following proofs ready.

  • PAN Card
  • Photo identity proof
  • Address proof
  • Self-attested copies of an income proof
  • Salaried individuals must have the last three months' salary slips, salary certificate, or the latest year's ITR (Income Tax Return) with income computation, Form 16, or the last six month's bank statement reflecting salary credits. Bank statements proof to track the previous loan sanction, and you may also need a loan sanction letter or amortisation schedule
  • Self-employed individuals must have ITR with income computation, balance sheets, profit and loss accounts with schedules, GST (Goods and Services) return for the number of months not covered in the latest financial year, credit card statement for the last six months, a copy of the contract order, Form 16 A (in the case of income earned from contracts), bank statements for the previous six months, the account of the individual borrower and co-borrowers, and repayment track or bank statements proof of track with a loan sanction letter or amortisation schedule

What are some things to keep in mind when applying for a Housing Loan top up?

Here are some things to remember.

  • The interest rate for the top up loan on a home loan is more or less the same or slightly higher than the interest on a home loan. However, the former can still be a good option, thanks to its quick and simplified process
  • Typically, you can use a top up loan for home renovation, furnishing, as well as redesign
  • The loan tenure for a top up can range up to 20 years or until you settle your primary loan. The lender decides the precise term based on your age, income, type of property and its value, etc.
  • The total amount of the top up loan and the original loan amount should be less than 70% of the property's value.
  • You can claim tax benefits on the top up loan

What are the benefits of a Housing Loan top up?

Here are some pros of opting for a top up loan.

  • Minimal Documentation: The process of applying for and availing of a top loan is relatively simplified. You can get quick access to funds without having to undergo lengthy procedures. In fact, the entire process for some banks is entirely digitalised.
  • Loan Tenure: The loan tenure for a top loan is long, so you can conveniently pay it off at your convenience. This leaves a lot of room for ease and helps you build a house you can truly love and admire.
  • Tax Benefits: Top up home loans also qualify for tax benefits. Hence, they can be as cost-effective in the long run as a home loan. Moreover, you can also avail of the PMAY (Pradhan Mantri Awas Yojana) subsidy if you are a first-time home buyer.
  • Easy Approval: As long as you have a good repayment history, you do not need to worry about undergoing a lengthy or gruelling approval. Most lenders are willing to offer top up disbursals to people with a good credit score and steady repayment history.
  • Lower Processing Fee: Since a top-up loan's application and approval process is straightforward, banks may charge a lower or zero processing fee.
  • Multiple Uses: A top up loan is much more flexible in terms of use. You can spend the funds on various expenses ranging from renovation, construction, repair, decoration, and more. The bank does not interfere with how you use or spend the funds.  
  • Attractive Interest Rates: The home loan top up interest rate is similar to home loans. So you do not end up spending a lot in the long run.

To Sum it up

A top up home loan is undoubtedly an excellent way to cover your additional financial needs. It is fast, hassle-free, and easily accessible. Moreover, you can use it for balance transfers as well. All in all, it is a fantastic option to ensure that everything goes smoothly and you can enjoy your beautiful home without any financial worries.

The IDFC FIRST Bank offers top up home loans at zero processing fees if the loan repayment is made from an IDFC FIRST Bank account. Now that you know what is a top up loan on a home loan is and its various benefits, you can go ahead and apply for one.



The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision