Home / Money / Personal Finance /  How to evaluate a lender when availing a top-up home loan

Top-up home loans help you fund big expenses such as wedding and education. But the terms and conditions vary from one lender to another.

“Top-up home loan is one of the primary reasons for a borrower to switch lenders. The other is, of course, lower rates that can help decrease their burden," said Aditya Mishra, founder and CEO,, a platform that helps borrowers shift loans.

If you avail a top-up home loan from your existing lender, the interest rate could be higher than the home loan rates for new customers. For example, if a new customer gets a home loan at 7.25%, the top-up home loan for the existing customers from the same lender could be expensive by about one percentage points.

Besides, there are other terms and conditions that the borrower needs to keep in mind when taking a top-up home loan from the existing lender.

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Some lenders could limit the maximum top-up home loan you can take if you are an existing customer and some offer it for a lower tenure. State Bank of India, for example, doesn't have any limit on top-up home loans and offer a longer tenure. Canara Bank, on the other hand, offers top-up loan up to 25 lakh and for a 10-year tenure, according to data from Due to such restrictions, those looking for a top-up could shift their loan to another lender with better terms and conditions.

Suppose a borrower wants a top-up, and the existing lender is willing to offer a maximum of 25 lakh. The borrower can shift the loan to a new lender that offers a higher limit on top-up and longer tenure, lowering the monthly outgo.

According to intermediaries, business owners used this technique to invest in a new house or commercial property in the past. They would use the top-up to make the down payment for the new property. For the remaining amount, they would take another loan. This way, they didn’t need to pay money upfront from their pocket.

But borrowers can be over-leveraged if they resort to such methods and fall into a debt trap.

(Do you have personal finance queries? Send them to and get them answered by industry experts)

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