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What’s More Beneficial? Home Loan Balance Transfer or Top-up Loan?

A person holding a model house with stacks of coins on top

If you want a top-up loan, it is better to do a home loan balance transfer and go for a top-up loan with your new lender.

Rahul has taken a loan to buy a house, but he needs some emergency funds. His financial planner tells him that he can go for a top-up home loan.

However, Rahul is also not happy with the services of the bank from where he has taken the home loan. His financial planner advises him to do a home loan balance transfer and then take a top-up loan from the new lender.

What is a top-up home loan? A top-up home loan is a loan that you get based on your home loan equity. Your home loan company will offer you a top-up loan if you have been making regular EMI payments.

Let us now look at some of the benefits of a top-up home loan.

  1. The money from a top-up home loan can be used for any purpose.
  2. The other benefit of a top-up loan is that it comes at a rate of interest that is more or less equal to your existing home loan.
  3. A top-up home loan is easy to process since you have already submitted the required documents and done the KYC. You will need documents that show that you have made regular EMI payments towards your home loan. Since banks need not do any verification, top-up loans are quickly approved.
  4. Top-up home loans are also available for a long tenure. You can get it till the tenure of your existing home loan. Or it may have a tenure of 20-30 years.

Home loan balance transfer vs top-up loan with your existing lender: When you want a top-up loan, you have two options. You can take a top-up loan loan balance transfer and get a top-up loan. We will see why you should choose the second option. 

Get benefits of lower interest rates: Sometimes, in a situation of decreasing interest rates, your existing home lender may not pass on the benefits of a lower interest rate to you, In such a case, it makes sense to go for a balance transfer to another lender who is offering you lower interest rates. Even if the interest rate is lower by 50 basis points, your EMI will reduce considerably.

Get better customer service: Sometimes, you may not be happy with the customer service of your existing bank. In that case, it wouldn’t be wise to go for a top-up loan with your current lender. If you do a home loan balance transfer and then go for a top-up loan, you can choose a lender which provides excellent customer service.

Negotiate for better terms and lower interest rates: When you do a balance transfer and go for a top-up loan with your new lender, you are in a position to negotiate better interest rates. Since the new home loan interest rate will be lower, the interest for the top-up home loan will also be more economical. So there is a double benefit. 

So when there is a question of a top-up loan with a home loan balance transfer vs top up with the existing lender, you should always prefer the first option.

Looking to do a balance transfer with Sammaan Capital? Click here

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