Your home is not just a shelter but an appreciable property. But, have you ever thought about using that equity to fund the dreams of your life? Well, a home loan top-up is one solution that provides a good chance of doing that. Whether you want a home makeover, preparing for your child’s schooling or need funds for a business undertaking. A home loan top-up is good for you, but is it a wise finance move for you? Let’s understand it more profoundly.
What is a Home Loan Top-Up and What Are Its Benefits?
Your home is a valuable investment as well as an asset. In this regard, a home loan top-up allows you to tap your assets for additional cash. The common measures for determining the amount you can borrow are the value of the property and the current Loan to Value ratio.
Key benefits of a home loan top-up
Lower interest rates: In general, top-up on a home loan is cheaper than a personal loan. This is because the rates of interest differ; the former being lower.
Quick disbursal: As the property is already pledged, it is easier for the approval of the loan as compared to other loan facilities.
Flexible usage: These funds can be used for any improvements on the house, education for one’s self or any of the children, or an emergency and need funds for medical bills or any business expansion.
Home Improvement Loan: Is it the Better Option Than Home Loan Top Up?
A home improvement loan is a particular type of loan that involves the financing of improvements on your home. It is a different loan type that has a lot of resemblance to home loan top-up in terms of interest rates but is quite different. A home improvement loan might be used for home expenditures. It might offer specific features or benefits such as tie-ups with contractors or interior designers.
While both home improvement loans and home loan top-ups can be used for home-related expenses, there are key differences:
Purpose: The home improvement loan is that it can be availed only for home renovation while the top-up can be used for any purpose.
Eligibility: The characteristics of this type of funds may be somewhat different from the characteristics of the second type of such loans, which are developed to attract different categories of consumers.
Interest rates: The borrower may receive different interest rates based on the loan product offered to them and from one licensed money lender to the other.
Repayment terms: In terms of loan repayment the terms may be different, the loan periods for home improvement loans are comparatively shorter.
Should You Go for Home Loan Top-Up?
Before choosing the home loan top-up, consider the following factors:
Need assessment: Define your financial requirements. Is it a necessity for the next five years, or is it a plan for fifty years down the future?
Repayment capacity: Assess your capacity to save for the accumulating EMIs without exerting too much stress on your pockets.
Interest rates: Compare interest rates with other loan options to make the right decision.
Terms and conditions: Learn about the particulars of the top-up foreigner loan Singapore such as the tenure of the loan and terms such as prepayment charges and processing fees.
Conclusion
A home loan top-up and a home improvement loan provide two different, but related means of financing for a homeowner. While, getting a top-up loan would serve as an all-rounded versatile fund, a home improvement loan is sanctioned to remodel the house. Each of these loans has specific characteristics, benefits as well as requirements for eligibility for the borrower so that one can unlock your home potential and meet your financial needs.
