Home Loan Top Up – Pros & Cons

Home Loan Top Up – Pros & Cons

December 15, 2020 136 By mindmingles

Home loans are nifty financial solutions that help people pay for the cost of building their own home, buying it, or repairing and renovating it. Often, borrowers prefer to avail home loans for these purposes instead of personal loans, because home loan interest rates generally tend to be more affordable. Borrowers can use a home loan EMI calculator to plan their repayment schedule and ensure that the EMIs are within the budget they have in mind.

However, what if the funds borrowed are not sufficient to cover the overall costs of building, buying or renovating a house? In that case, people could, of course, choose to borrow funds through a personal loan. But a top up home loan is another alternative to consider, since this option allows people to borrow an additional sum of money, over and above their original home loan, to meet the added costs.

Before availing a top up home loan, there are some things that borrowers should be aware of. Firstly, they need to check out the home loan interest rates for the top up value. They can also make use of home loans EMI calculator to check out the EMIs they’ll have to pay on the top up amount. 

Additionally, it is also important to understand the pros and cons of a top up home loan. Here is a closer look at these two sides of the coin.

Advantages of top up home loans

There are many upsides for borrowers looking to get a top up on their home loans.

1. Quick and easy application process 

Top up home loans are offered to existing borrowers, and they’re availed from existing home loan lenders. This makes the process of application and approval much simpler, as the documentation required is also greatly minimized. Lenders already have most of the information needed to process the application, so top up loan requests are approved faster.

2. Low rates of interest

Since top ups on home loans fall under the same category as home loan, they also come with rates of interest that are more affordable than the costs associated with personal loans. This is a major advantage of availing top up home loans. Although the rates of interest may vary from one lender to the next, borrowers will generally find the costs within their budgets.

3. Tax benefits for borrowers

Top ups on home loans also come with tax benefits for the borrower. More specifically, borrowers can claim benefits as per section 24 and section 80C of the Income Tax Act, 1961. The interest component as well as the principal component qualify for tax benefits as per the Income Tax Act.

4. End use flexibility

A top up loan on an existing home loan can be used for a variety of purposes like paying for renovation costs for the borrower’s home, meeting the down payment requirements for constructing a new house or for purchasing a ready-to-move-in unit, or even for buying expensive furniture and fitting for the house.

Disadvantages of a top up home loan

Despite the upsides of top up loans, as explained in the previous section, they also have some downsides. Here’s a preview.

1. Increase in liabilities

Availing the top up facility on an existing home loan has the effect of increasing the overall liability for the borrower. Ultimately, they will need to repay larger EMIs to settle the additional debt. A home loan EMI calculator can prove to be handy here, since it can help people plan their finances and repayment schedules better.

2. Available for existing customers only

As is evident from their name, top up loans are also only available to existing  borrowers, who have already availed housing loans from the lenders in the market. Since they are only available to existing customers, people who wish to avail the benefits of a Home Loan Top Up first need to avail a housing loan.


The benefits of a top up loan far outweigh the downsides. So, eligible borrowers can make use of this facility to meet the added costs of renovating, buying or constructing the home of their choice. And as with any loan, it is always a smart idea to repay the EMIs due on time, so there are no penalties or added charges levied.