What is Home Loan Top Up? Interest Rates, Eligibility and Benefits Explained

Home Loan Topup

Home loans are the most popular types of loan that allows you to fulfill your dream of owning a home. However, as circumstances change, there may arise a need for additional funds for various purposes like renovation, education, medical expenses, or any other personal requirements. This is where a top-up home loan comes into play. In this article, we will delve into the concept of top up home loans, tax benefits, how to apply for them, and the factors one should consider.

Lowest interest rates on top up home loan starts from 7.10%. The repayment tenures can be the same as that of the home loan. The maximum amount can depend on the balance outstanding amount of the home loan or a specific amount set by the bank. Processing fees can be up to 1% of the loan amount.

What is Home Loan Top Up?

A Home Loan Top Up is an additional loan provided by banks and financial institutions to existing borrowers. It allows borrowers to tap into the equity they have built in their property and use it to borrow additional funds over and above their existing home loan amount. The interest rate charged on Home Loan Top Ups is typically slightly higher than that of regular home loans.

Lowest Interest Rates of Home Loan Top Up(2023):

BankRate of Interest
HDFC Home Loan Top Up 8.30% to 9.15% p.a.
SBI Home Loan Top Up 7.90% to 10.10% p.a.
Axis Home Loan Top Up7.75% to 8.40% p.a.
Union Bank Home Loan Top Up6.80% to 7.35% p.a.
Bank of Baroda Home Loan Top Up7.45% to 8.80% p.a.

What are the benefits of a Top Up Loan?

  • Lower Interest Rates: One of the significant advantages of a Top Up Loan is the lower interest rates offered. These loan products generally carry lower interest rates compared to other types of loans such as personal loans or gold loans. The interest rates on a Home Loan Top Up are usually the same as the interest rates on the existing home loan.
  • Access to Additional Funds: With a Home Loan Top Up, borrowers can access additional funds over and above their existing home loan amount. This provides them with the flexibility to meet various financial needs such as home renovation, education expenses, medical emergencies, or other personal requirements.
  • Higher Loan Amount: Home Loan Top Ups often provide borrowers with a higher loan amount compared to other types of loans. The loan quantum offered can range from 70-80% of the property’s market value. This allows borrowers to avail a substantial amount based on the equity they have built in their property.
  • Tax Benefits: Another benefit of a Home Loan Top Up is the potential tax benefits. The interest paid on the Home Loan Top Up is eligible for tax deductions under Section 24(b) of the Income Tax Act. Borrowers can claim deductions of up to Rs. 2 lakh per annum for the interest paid on the top-up loan.
  • Longer Tenure: Home Loan Top Ups generally come with longer repayment tenures. This allows borrowers to spread out their repayment over a more extended period, resulting in reduced monthly EMIs
  • No Need for Security: Since a Home Loan Top Up is obtained on an existing home loan, no additional collateral is required to get the loan.

What are the tax benefits of a Top up on Home Loan?

Borrowers may be eligible for tax savings on top-ups if the funds are used to renovate, expand, build, or repair residential property. The tax benefits depend on the purpose for which the funds are utilised and the type of property.

  1. Renovation, Expansion, Construction, or Repair: If the top-up loan is used for these purposes, borrowers may be eligible for tax deductions. For self-occupied homes, a tax deduction of up to Rs. 30,000 on the top-up home loan is available. However, if the loan was used for rental property, there is a limitation on the deduction that can be claimed. These deductions are part of the overall tax deduction slab of Rs. 2 lakhs per year for the home loan interest component1.
  2. Purchase or Construction of a New Home: If the top-up loan is utilised to buy or build a new home, both the principal and interest components are tax-deductible under Sections 80C and 24(b). This provides borrowers with additional tax benefits on the top-up loan.
  3. Residential Property Renovation, Alteration, or Repair: In the case of utilizing top-up funds for residential property renovation, alteration, or repair, the deduction can only be claimed for the interest component1. The principal component does not qualify for tax benefits in such cases.

To claim tax benefits, it is crucial to keep receipts and papers for the work up to date and submit them at the time of claiming deductions.

What is the Eligibility Criteria Top Up Loan?

Criteria for Home Loan Top Up is almost the same as the criteria for Home Loan of the bank you’re applying to or have taken the loan from. It can vary from bank to bank. However, these are some important factors to keep in mind before applying:

  1. Not more than 1 EMI bounce in the past 12 months
  2. Any EMI bounce should be cleared before next EMI payment
  3. You should have a clear home loan repayment track record of at least 6 months

How to apply for a Home Loan Top Up? What is the process?

  • Evaluate Eligibility: Check if you meet the eligibility criteria set by the lender, which usually includes factors such as a good repayment track record on the existing home loan, a certain minimum period of repayment, and a reliable credit score.
  • Gather Documents: Collect and organise important documents such as income proof, address proof, identity proof, property documents, and bank statements.
  • Approach the Lender: Contact your existing home loan lender to inquire about Home Loan Top Up options. You can check their website or directly call your bank. Compare the interest rates, terms, and conditions offered by different lenders to make an informed decision.
  • Loan Application: Fill out the loan application form accurately, providing all necessary details. Attach the required documents and submit the application to the lender.
  • Loan Processing: The lender will verify the documents submitted, evaluate your creditworthiness, and assess the market value of your property. This process may take a few days or weeks.
  • Loan Approval and Disbursement: Upon successful verification and approval, the lender will sanction the Home Loan Top Up amount. The funds will be disbursed into your account, usually in a lump sum.

Factors to consider before applying for a Home Loan Top Up:

  • Interest Rates: Sometimes bank offer higher interest rates to existing home loan customers vs new customers. It is advisable to research on best interest rates and negotiate with the lender.
  • Loan Tenure: Some banks offer existing customers a longer tenure on the existing home loan tenure while others offer a limited tenure that is much shorter than the remaining home loan tenure.
  • Loan Amount: Some banks offer a Home Loan Top Up with a limited amount while others are more flexible. It is advisable to research and chose the right bank for your needs
  • Processing Fees and Charges: Some banks don’t charge their customers for a Home Loan Top Up, while others might have processing fees and other charges included.
  • Prepayment Flexibility: Most banks don’t have any penalties for paying the top up loan early.
  • Existing Loan Conditions: Each lender has different policies regarding the eligibility criteria, minimum outstanding loan amount, and repayment track record. Understand these conditions before finalising the lender.


Home Loan Top Ups provide individuals with the flexibility to obtain additional funds using their existing home as collateral. Understanding the concept, tax benefits, application process, and factors to consider is crucial for making informed decisions. By carefully evaluating these aspects, borrowers can avail a Home Loan Top Up that best suits their financial requirements.


Is Home Loan Top Up good for me?

Yes, a home loan top-up can be good for you if you have a genuine need for funds, such as home renovation or other personal expenses. It offers a simpler way to borrow as you leverage the equity of your existing property at lower interest rates.

What are the interest rates for a Home Loan Top Up?

Interest rates for home loan top-ups generally hover slightly above your existing home loan rates. However, they are lower than personal loan rates.

How do I apply for a Home Loan Top Up?

Applying for a home loan top-up is very simple. If you have an existing home loan with a bank, approach them with the request. They will assess your repayment history, property value, and other criteria before approving the top-up.

Can I get tax benefits for home loan top up?

The interest paid on top up home loans is eligible for tax benefits under Section 24(b) of the Income Tax Act. Home loan borrowers can claim deductions up to Rs. 2 lakh per annum for the interest paid on a top-up loan. Additionally, if the funds obtained are used for home improvement, the interest paid on the loan becomes deductible under Section 24(b) and can provide further tax benefits.

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