Home Loan Fees and Charges – Home loans consist of a lot of components in addition to the principal amount being borrowed. These costs have to be borne by the borrowers themselves and are payable before the loan gets wholly processed and approved. Processing fees are the most common fee on home loans. However, there are several other charges to be kept in mind.
Processing fees and other charges depending on the nature of the home loan you have applied for. Generally, 2.25-3% of the total loan amount is charged as the home loan processing fee by financial institutions such as Bajaj Finserv.
What are the various types of home loans availed in India?
- Land Purchase loans are given against a plot of Land.
- Home purchase loans refer to those loans which are borrowed for buying a house.
- Home construction is a type of loan where banks lend the amount of money required to construct a house from the ground up on an already purchased plot of land.
- Home extension loans are granted if when borrowers want to expand the current size of the property owned by them.
- Redevelopment of a pre-existing house calls for a Home renovation loan.
The following section helps you decode the various charges on a home loan at a glance.
The various types of fees and charges on home loans are:
- Processing fees – It is a one-time fee imposed by financial institutions for processing the loan under the borrower’s name. The lenders require this money for loan appraisal and underwriting. This charge is generally non -refundable. It is the cost that financial institutions incur for providing their services.
- Stamp duty fee – It is a mandatory charge that has to be paid by the borrower to get his loan approved. The amount of stamp duty fee varies from one state to another.
- MODT charges – Memorandum for deposit of title deed(MODT) is essentially a declaration by the borrower that he submitted all the relevant documents at his own will. It is generally 0.1% – 0.5% of the loan amount borrowed.
- Legal and technical charges – This is the cost incurred to get your documents legally verified using various techniques. It generally lies between Rs. 1,000- Rs. 5,000, depending upon the type of home loans availed.
- Loan conversion charges – People availing loans at a fixed rate of interest and wish to change it to the floating regime can do so by paying a fee on the outstanding amount. Note that this conversion can only be done once, and costs around 0.5% of the loan outstanding in the ledger of the borrower.
- Loan prepayment charges – In case of loan foreclosure, a certain amount is levied on the borrower. This charge is known as loan prepayment charges. There are several do’s and don’ts in case of a home foreclosure you should be aware of.
- Mortgage indemnity fee – This money is charged to the borrower to relieve the lender from certain risks.
- Penalty for bounced/delayed EMI payment – As the name suggests, this is a fine imposed in case of delayed or missed payment of an EMI.
- Documentation fee – This charge ensures smooth processing of the loan applied for and getting the ECS mandate done, along with some other formalities.
- CERSAI charges – Central Registry of Securitisation Asset Reconstruction and Security Interest is a government organization that ensures the security interests of mortgages. This charge has to be paid even before the loan is approved. The main reason behind this charge is to prevent mortgage loan fraud in the country.
These are the various kinds of hidden charges on home loans you have to pay if you apply for it at any financial institution. After evaluating these charges, you should also compare the current home loan rates provided by various NBFCs and opt for the one providing the lowest interest rate. It is only after you compare home loan rates that you can find out which financial institution you should opt for.
