Top-up loan facility

It’s an easy route for housing loan borrowers to obtain additional loan
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Jammu & Kashmir is witnessing urbanisation at a faster speed, leaving it only with plenty of developmental challenges. However, most of all, it is the housing challenge which is acute in nature as people are struggling to own a dwelling.

Most of the segments of population don’t have the capital or enough resources to afford a house or dwelling of their own. Pertinently, housing has remained an unfulfilled basic need for most of them to settle peacefully.

Having a house to live in does not only mean a permanent shelter, but it envisages a sense of security to a person that he/she has a roof to himself/herself. Undoubtedly, home is a place where one lives, grows, nourishes and builds family and dreams.

In the given scenario, banks have housing loan schemes in place to lend financial support to those who aspire to have their own house. Even as housing loan schemes, over a period of time, have become popular, questions loom large when it comes to hassle free access to the scheme.

Most of the time, I find many queries regarding housing loans. Most of the mailers show their appetite for obtaining a housing/home loan, but lack proper guidance and point out cumbersome processes stopping them to pursue it.

There are bank customers who want clarity on many aspects of the housing loan scheme. But most of the time, allegations galore that the bank staff shows lackadaisical attitude and don’t bother to guide their customers.

The pre-sanction and post-sanction formalities required for obtaining a housing loan are not clearly communicated to the customers. As mentioned by a section of borrowers who have already availed housing loans and are in need of additional finances, lack guidance.

They have the concept that being a housing loan borrower doesn’t entitle them to approach for additional housing loans. Even as there are borrowers who know that they can avail the additional loan, fear of revisiting cumbersome loan application processes keeps them away from the facility.

However, there is a hassle free mode of availing the additional housing loan facility known as ‘Top-up’ loan facility where the borrower is extended the additional loan just filling up a simple application form.

What exactly is a top-up loan? Is it beneficial for the home loan borrower to avail it? Is J&K Bank providing this facility?

It’s a quick way of getting additional housing loans without getting into the hassles of documentation. The home loan borrower has a house already mortgaged with the bank, and all that is required is asking the bank to top up the loan. This is a facility over and above the existing home loan of the borrower.

However, the bank will consider the borrowers for top-up loan facility who have been paying their equated monthly installments (EMIs) regularly with no overdues.

It’s beneficial for the borrower as documents required for a top up loan are minimal in comparison to new loans as the bank already has all your details in place with respect to your existing home loan. Besides, you can also get tax benefits.

J&K Bank has already introduced a top-up loan facility for its home loan borrowers under Individual category with account status as Standard with no overdues and having completed repayment period of at least three years. The borrowers can avail up to Rs. 25 lakh as top-up loan facility and they can use the funds for personal use without any end use verification.

Notably, the loan is provided against the extension of charge on the house property already mortgaged to the bank. The loan amount shall be directly credited to the linked saving/current account of the borrower of the main housing loan already availed.

What are the loan processing charges and repayment schedule for this top-up facility?

The loan processing charges are linked to the loan amount obtained through a top-up facility. It’s 0.25% of the loan amount with minimum of Rs. 1000 and maximum of Rs 5000/- plus applicable GST.

As far as repayment schedule is concerned, the loan is to be repaid in maximum tenure equal to the residual tenure of the already availed under the main housing loan scheme.

What is the documentation required for this top-up loan facility?

Pre-sanction documents to be submitted include a copy of the sanction letter of underlying J&K Bank Housing Loan Scheme duly accepted by the borrower and valuation report of the property mortgaged (not older than 06 months), duly signed by the valuer and verified by branch officials.

Post- sanction documentation includes loan agreement and deed of extension of charge to be obtained from the borrowers/guarantors/mortgagors.

What are the main features of the J & K Bank Housing Loan Scheme?

The loan is provided for

= Purchase of plot of land for construction of residential house,

= Construction of house/flat/ dwelling unit

= Outright Purchase of an existing house/ flat/dwelling unit (fully built/ under construction)

= Repairs/ renovations/ additions/ alterations/ completion of an existing house/ flat/ dwelling unit

Even the bank provides finance for construction/ purchase of 2nd dwelling unit per family or purchase of land/plot irrespective of whether the 1st dwelling unit has  been constructed/ purchased from own sources or bank finance.

Those with regular income are eligible to obtain the loan. The quantum of finance is linked to the repayment capacity of the borrower.

The repayment of the loan can be made within 30 years or till the borrower attains age of 75 years (in case of salaried class & pensioners). For all other categories of borrowers, the age limit in repayment is 70 years.

Extensive details of the scheme are available on www.jkbank.com.

What are the precautions one should take in raising housing loans?

First of all you have to decide about the quantum of finance you require. Do it by considering your monthly income, your age, other debts and financial commitments. You should even take your job stability into account. Your loan amount should not make your repayment challenging that may lead to debt trap.

After deciding your loan amount, you should decide about the repayment period of the loan. When your loan tenure is for a short period, your equated monthly installment (EMI) will be very high. Longer tenure is generally chosen to enhance the loan eligibility of the borrower but remember longer the tenure greater is the cost of borrowing. If EMI for a short term is not affordable and you want to pay off your loan as soon as possible, consider a middle path for the period of 10 to 15 years.

After availing the home loan facility, it’s important to go for insurance of your home loan amount (Home Loan Protection Plan) as well as the property which you have purchased or constructed out of the bank loan.  Home Loan Protection Plan (HLPP) is an insurance plan where the insurance company settles any outstanding amount on the home loan with the bank in the event of the borrower’s death. This way, a borrower can ensure that his/her family will not have to pay the outstanding loan amount after the demise of the borrower. However, it is not mandatory to purchase home loan protection plans. Under property insurance, you purchase cover against risks to property/home due to earthquake, fire, flood, storm, theft etc.

An individual is required to pay tax if his income exceeds taxable income. Government provides tax relief for some businesses and individuals who invest on which deduction is available under section 80C of the income tax Act, 1961. You can avail tax relief on the home loan principal amount and interest paid. However, this relief is available to borrowers who are continuing or making prompt payment.

Disclaimer: The views and opinions expressed in this article are the personal opinions of the author.

The facts, analysis, assumptions and perspective appearing in the article do not reflect the views of GK.

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