Home loans are useful when you need funds for purchasing a house. Through housing loans, you can buy the house of your dreams without exhausting all your lifelong savings. It has a flexible repayment schedule where you can comfortably repay the amount as per your financial viability. However, home loans can bring changes to your budget and daily finances. It is because, apart from the EMI, there are various other charges that you need to pay for availing the loan.
Before applying for a loan, it would be best to know about all the home loan fees to avoid facing any hassles in future.
- Processing fee
Also called the loan origination fee, a processing fee is a mandatory charge you need to pay whenever you apply for housing loans. A one-time charge is levied for processing your loan application. The amount of the processing fee is mostly a percentage of the total loan amount. It can include charges like Memorandum of deposit of title deed (MOD), and CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India) charges. It is usually upfront that you need to pay from your pockets and is not deducted from the loan amount. You can talk to a lender to waive off a part of the processing fee at the time of application.
- Administrative fees
Lenders charge administrative fees to cover the operating cost of the home loan process. It includes the annual charges for updating your home loan records and for record-keeping and other administrative costs.
- Late payment charges
If you delay in making EMI payments, the lender can charge you a late payment fee or a late penalty. It could be a fixed amount or a percentage of your loan amount. The bank can also ask you to pay the interest along with EMI for late payment.
- Prepayment charges
When you pay the loan before the end of the tenure, it is called prepayment. Lenders usually charge prepayment or foreclosure fees for prepayment. It could be 2-3% of your total loan amount. However, as per Reserve Bank of India’s guidelines, lenders cannot charge a prepayment fee on floating interest rate home loans. Therefore, you must ensure that prepayment charges are not levied, if you opt for a floating interest rate loan.
- Legal fee
Before approving your loan application, lenders hire a team of lawyers to check the legality of your home. The legal fee is levied when the lenders hire external lawyers for the legal inspection of the home loan.
- Technical verification fee
Similarly, the lenders charge a technical verification fee for the inspection of the mortgaged home. The lenders inspect the property for evaluation and the determination of the loan amount.
These housing loan charges can increase your total cost of borrowing. Therefore, before you apply for home loan, read about these charges and discuss with the lender if required.
