Which is Better for You: A Home Loan Top-up or a Balance Transfer?

Home Loan Top-up

A Top-Up Loan is an additional loan amount that can be taken out on a property that already has an existing mortgage. The new loan amount is added to the outstanding balance of the original mortgage of the Home Loan, and the borrower makes one combined monthly payment.


Top-Up Loans can be a good option for borrowers who need to make home improvements or consolidate other debts. They usually have a lower rate of interest than Personal Loans or credit cards and may offer tax advantages if the money is used for home renovations.


Before taking out a Top-Up Loan, borrowers should compare offers from multiple lenders to find the best deal. It’s also important to consider the potential risks, such as lengthening the term of the mortgage and increasing the amount of debt that must be repaid. 


What is a Home Loan balance transfer? 


Transferring your outstanding mortgage balance from one lender to another is known as a Home Loan balance transfer. This can be done for several reasons, such as getting a lower interest rate, switching to a different type of loan, or consolidating multiple loans into one.


There are a few things to keep in mind if you’re considering a Home Loan balance transfer:

  1. You’ll need to make sure that the new lender accepts the balance transfer.

  2. You may have to pay a fee to the new lender for taking on the balance transfer.

  3. It’s important to compare interest rates and other terms before deciding whether or not a balance transfer is right for you. 


Difference between a Home Loan balance transfer and a Top-Up Loan




There is no restriction on the use of a Home Loan top-up. Since there is no restriction on their use, you could use them for anything from funding a wedding to financing post-secondary education.


Generally, a Home Loan balance transfer refers to the transfer of the outstanding balance of your mortgage to a different lender for a lower interest rate and for only the purpose of repaying the outstanding balance of your Home Loan.




At any point during your borrowing cycle, you will be able to apply for a Home Top-Up Loan. It is possible to transfer your Home Loan balance only after you have made 12 monthly repayments to your previous lender.


Amount of loan


There is a limit to how much a Top-Up Loan can be. However, this is approximately 70-75 percent of what you would have to pay for a Home Loan if you deduct the amount owed from the estimated market value of your property.


In some cases, a Home Loan balance transfer is allowed for a portion of the property’s overall value, between 80 and 90 percent.


Tenure of the loan


Your current Home Loan will continue to be serviced by a Top-Up Loan for the remaining period. There may be a difference in tenure between lenders.


By transferring your balance, you can take advantage of the lower interest rate and shorten the repayment period.


Top-Up Loans and Balance Transfers: Eligibility Criteria


It is important to understand that besides the differences between a Top-Up Loan and a balance transfer, there are also differences in the eligibility criteria.


Home Loan top-up


  • The borrower must already have obtained a Mortgage Loan from a lender. Borrowers whose Home Loans were disbursed three months ago can request a top-up.


  • The lender grants a Top-Up Loan after reviewing the credit history of your current loan and identifying potential defaults.


Home Loan balance transfer


  • Currently, you are repaying 12 monthly installments on a House Loan.


  • You must own the property. Getting a balance transfer on your Home Loan is not possible if the house is under construction or renovation. The borrower must not have defaulted on any EMI payments to qualify.



In conclusion, Home Loan balance transfer and top-up both have their pros and cons. It depends on the individual’s needs and preferences. For example, some people may prefer a Home Loan top-up because it offers a lower interest rate, while others may prefer a balance transfer because it offers greater flexibility. If you’re still unsure about which option is better for you, speak to a financial adviser for more information regarding a Top-Up Loan and balance transfer.


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