Tax Benefits on a top up loan – You will get tax benefit on a top up loan only if the loan amount is used for buying a house (on principle and interest) or if you are using it for renovation purpose (interest part). For any other purpose if you use the money, you will not get any tax benefits.
Interest rate for top up loan – A The interest rate for the top up loan is around 1.5% to 2% higher than the home loan interest rate of the bank, which means it can go up to 11.5% to 14% finally.
No Security Required – A top up loan does not need you to mortgage some asset, because its given on top of your home loan and anyways your home documents are with the bank. So one important point to note here is that even if you close your original home loan, you need to also close your top up loan before you can ask back your original house papers from the bank.
Top up loan amount – Generally the amount of top up loan cant exceed the original home loan amount you have taken and also there is always an upper limit defined by the bank for the top up loan , which can range anywhere from 15-40 lacs. So if you have taken a Rs 30 lacs home loan, you can take maximum top up loan of another Rs 30 lacs if your eligibility supports you after some years.
Processing Fees – Almost all the banks will charge a processing fees for approving the top up loan . The charges are same as their home loan processing charges . For example – if you take a case of HDFC LTD , the charge 0.75% of the loan amount or Rs 2,000 which ever is maximum as the loan processing charges for the top up loan.