Housing loan is a
liability that several people happily take in their life.
In fact, even
financial wizards approve it because they consider it as a positive liability.
However, due to the rising real estate prices & loan interest rates, many
housing loan borrowers have their finances stretched to the limits.
Offer
Additional Loans..!
If they have to raise
some funds for a need, they will be really in a spot. However, what they do not
remember is that several banks offer additional loans or top-up loans to
housing loan customers.
Recently, India's
largest bank SBI (State Bank of India) started offering top-up home loans at a
cheaper rate than its counterparts.
SBI's loan is priced
at 11.25 per cent per annum, while other banks and HFCs (Housing Finance
Companies) interest rates are upwards of
12%.
Sure, these loans may
appear attractive.But do not proceed until you have acquainted yourself with
the details.
Top-up housing loans,
unlike loans against property, are extended only to the existing housing loan
borrowers of the bank and HFCs.
The tenure of these
can go up to 15 to 20 years, depending on your housing loan's term. It is
offered only to existing customers. The
maximum tenure could be the same as the balance repayment period.However, it is
based on banks evaluation.
Usually in HDFC the total of outstanding housing loan amount
& the top-up loan does not exceed 60 per cent of the property's current
market value. The maximum limit under the top-up loan is Rs. 10 lakh.
Tax Benefits..!
The lenders - bank and HFCs consider factors like value of
the property, the outstanding home loan, repayment history & repayment capacity before approving the Top -
up loan.
Mr. Kapil Narang,
COO, Ameriprise India,
a financial planning company said, "An interesting aspect of a top-up Home loan is that it can be used to
meet your any personal requirements
which includes furnishing your house, higher education, purchase of
furniture, business requirements, children's marriage and education etc"
If you utilise your
top-up home loan for modifying, renovating or acquiring add-ons to your
existing house, then you can also claim tax benefits for the same"
Top-up Home Loan Vs
Personal Loan..!
Compared to personal
loan, the procedure is simpler & quicker since you are an existing home
loan customer. Besides, while the term of a personal loan is between 12 month
and 24 month only, a top-up home loan's tenure could go up to 15 years or 20
years.
Interest rates on top
up home loans are quite low when compared to personal loans. Their EMIs are low
because of longer terms, while the amount you would be eligible for is higher.
While personal loans
can attract an interest rate of 16 % to
24 % per annum, depending on the bank and HFCss assessment of your profile,
top-up housing loans carry a rate of 11.25 to 14% per year.
Mr. Kapil Narang also
said, "However, some lenders have in-built conditions that you should
evaluate. For instance, in the first year of availing the top-up home loan, any
prepayments made towards your housing loan (partial / or full) will be adjusted
towards only your top-up home loan"
Top-up Home Loan Vs
Loan Against Property..!
First, evaluate other
forms of secured borrowing. These could include loans against property, life
insurance policy, gold ornaments, Shares(securities) and mutual fund units.
Now, loans against property carry rates higher than that of top-up housing
loans. For an example, SBI charges a
rate of 15.25 %to 15.50% for loan against property. But just 11.25% for top-up
housing loans.
It may be more
prudent to increase your loan against a property that is already pledged rather
than pledging a new property. So, you may still consider a top-up home loan.
Top-up Home Loan Vs
Loan against life insurance policy..!
Loans against life
insurance policies fare better on this front. LIC's rate of interest for such
loans is about 10% and the repayment schedule is flexible, too. If the loan
amount sanctioned meets your requirement, this is perhaps the cheapest &
most convenient option.
However, you need to
take a call on whether you wish to take the risk of pledging your protection
cover. After all, it is meant to financially secure your dependents in case of
your death. The insurance company will adjust your dues against the amount
payable to your dependents. Therefore, you need to be cautious.
Top-up Home Loan Vs
Loan against Gold Jewellery..!
Mortgaging your gold
jewellery and investments (Coins and
Bars) can also be considered. Gold loans come with interest rates of 11% to
24%. If you get such a loan at a reasonable rate, you can consider the
option.However, remember that gold loans are granted for a short term of 1 to 3
years.
Next, you can look at
borrowing against your Shares (stocks) and mutual fund investments.The charges
a rate of 14 % to 16%. Loan against
shares or securities usually amount to an average of 40% of your share value.
Additionally, there
is a mark-to-market element, which specifies that if the value of your shares
drops due to market movement, you would need to make good the differential
immediately either in cash or through further pledging of securities. If this
is not done in time, the lender (bank, Fincancial Company) may liquidate your
holdings & settle the loan
In short, top-up
housing loans do seem like a quick antidote, particularly for your any funding
requirements. However, ensure that you examine all other avenues & settle
for the one that suits your need best.
Top Up Home Loan
- Interest Rates (%)
SBI 11.25
ICICI Bank 12.25
HDFC 12.25
Standard Chardard
Bank 12.75
Src: BS, ET
No comments:
Post a Comment