Is taking a house mortgage top-up a great choice?

I pay an equated month-to-month instalment, or EMI, of 55,000 on a house mortgage obtained at an rate of interest of seven.25%. I even have a automobile mortgage taken at 8.5% curiosity and pay an EMI of 13,000. Apart from, I even have availed of a jumbo mortgage (one that’s larger than the common restrict and has strict credit score necessities) with an EMI of 12,000 at 16% curiosity. The excellent principal for the automobile mortgage is 5.5 lakh and must be repaid in 4 years, and the jumbo mortgage has an excellent principal of 4 lakh that needs to be repaid in three years.

I’m now planning to take a top-up on my house mortgage for 10 lakh to repay the automobile mortgage and jumbo mortgage? After closing these two loans, I plan to extend the EMI quantity on my house mortgage from 55,000 to 80,000. Is that this a great choice?

—Title withheld on request

Please examine the rate of interest of your property mortgage at the moment. House mortgage charges have been rising constantly following the repo fee hikes by the Reserve Financial institution of India over the previous 15 months. Presently, the rates of interest of floating fee house loans are upwards of 8.5%. Your private home mortgage fee should have additionally risen above 7.25% by now. If it hasn’t, it could possibly be as a result of in some house loans, the speed stays fastened for a sure tenure (often 12-18 months) earlier than it turns right into a floating fee mortgage.

If the prevailing fee of house loans is 8.5%, you’ll not acquire from taking a recent top-up mortgage to foreclose the automobile mortgage. Sure, it’s going to make sense to take a top-up house mortgage to repay the bank card mortgage that expenses 16%. The 7.5 share level distinction within the curiosity will carry down the curiosity value for you. However do examine if there’s a foreclosures penalty clause within the mortgage settlement. Any such penalty will eat into the advantages that may accrue from flipping the loans. Additionally, issue within the mortgage processing price and different expenses of the top-up mortgage.

Prepayment of long-term loans is one of the simplest ways to deploy surplus cash when rates of interest are very excessive. Growing the EMI of the prevailing house mortgage is a good suggestion. It would progressively scale back the mortgage tenure and you may be debt free quicker.

Raj Khosla is managing director at

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Up to date: 19 Jun 2023, 10:49 PM IST