Once you show your bank that you can repay the home loan, you can ask them to get it topped up. It can be used as a personal loan to finance anything from your interior decoration or child’s education to daughter’s marriage. The top-up is treated as a second loan and is charged a slightly higher interest than the existing home loan (usually 1-1.5 %), and you need to pay a separate processing fee.

Home loan Banks and housing finance companies extend top-up loans to existing borrowers, on completion of at least six repayments. It is considered as an extension of your existing home loan, but they are not particular about how you spend that money.

What they look for is whether you have been prompt in repaying the EMIs of the existing housing loan. If there are backlogs in the repayment track, then the lender may not be willing to offer you a top-up.

Another factor that determines the amount of top-up is the existing market value of your property. The more the property value has gone up, the more you can avail as a top up. The current repayment capacity of the applicant and the amount of loan that is already repaid will also be considered. This is done to ensure that you are capable of servicing the top-up loan.

Apart from these, the bank’s lending policy also determines the amount you get as a top-up. Some banks have a cap on top ups based on the original loan taken, while some others extend loans on current market values, outstanding balances and repayment capacity. For instance, an HDFC customer can avail a top-up loan subject to a maximum 70 % LTV, considering the repayment capacity of the borrower as per their policy. Let’s assume your outstanding loan is Rs 5 lakh and the current market value of your property is Rs 10 lakh. In this case, HDFC will offer you a top-up of Rs 2 lakh, if you are eligible for a loan of Rs 7 lakh as per your income statements. ICICI Bank, has a cap of 20 % of the original amount borrowed. That is, if you have availed a loan of Rs 10 lakh, you will be eligible for a top-up of Rs 2 lakh, regardless of the value of the property or outstanding balance in your loan account.