Top-up loans slightly costlier than regular ones

Interest rates for a top-up home loan typically tend to be slightly higher than those for a regular home loan. For instance, while a regular home loan might have an interest rate of 8.5%, a top-up home loan could have a rate of around 9% to 9.5%, depending on the lender and prevailing market conditions.

Repayment terms and conditions for a top-up home loan are often similar to those of a regular home loan. The loan amount can be repaid through Equated Monthly Installments (EMIs) over a specified period, usually ranging from 5 years to 20 years, depending on the lender’s policies and the borrower’s preferences.

Let’s consider an example:

Suppose you have an existing home loan of ₹50 lakh with an interest rate of 8.5% and a remaining tenure of 15 years. Now, you opt for a top-up loan of ₹10 lakhs at an interest rate of 9%.

Here’s how the repayment might work:
Regular home loan
Loan amount: ₹50 lakh
Interest rate: 8.5%
Tenure: 15 years
The EMI for this loan comes out to approximately ₹49,075.
Top-up home loan:
Loan amount: ₹10 lakh
Interest rate: 9%
Tenure: 15 years
The EMI for this top-up loan comes out to approximately ₹10,609.
So, your total EMI payment after the top-up loan would be ₹49,075 (regular home loan EMI) + ₹10,609 (top-up home loan EMI) = ₹59,684.

Regarding flexible repayment schedules, some lenders may offer options like step-up EMIs, where the EMI starts lower and gradually increases over time, or flexible loan tenure, allowing borrowers to extend or shorten the repayment period based on their financial circumstances. However, these options vary between lenders, so it’s essential to check with your specific lender for available repayment flexibility options.

The author is CEO and Co-founder, BASIC Home Loan