During home loan applications, keeping an eye out for various kinds of charges is a must. It is not only about EMIs and there are many other charges that apply in this case. Home loans have several charges which are payable by borrowers throughout the application procedure and also the tenure of the loan. The charges may vary from one lender to another. Experts feel that most applicants start worrying about making EMI payments whenever they obtain a home loan, without understanding that there are many other charges imposed by banks. These should be accounted for by the applicant, while applying for any home loan.
These include the processing fee, which could be a flat fee or a variable percentage (0.5-2%) of the loan amount. There are administration charges or log-in fees between Rs. 2,500-6,500. There are also technical assessment, stamping, pre-EMI, income tax certificate, insurance premium, and re-appraisal charges.
There could also be other fees that apply in some scenarios including loan conversion fee, legal fee, partial prepayment fee, prepayment fee, late payment fee, notary fee, franking fee, and more. You can pay approximately 0.2-0.4% of the home loan value as these extra charges according to experts. Some banks may also waive some charges and processing fees for applicants who meet certain criteria and are eligible, while also providing them as part of festive schemes/offers.
Co-Founder and CFO at Square Yards, Piyush Bothra, states that while fees are separately charged by some lenders, others may also incorporate several charges cumulatively. There are many charges which remain fixed and also are a part of the entire procedure, while some remain linked as a percentage of the amount of the home loan. There will first be the processing fees for home loans which are not refundable and apply for processing loan applications. This may vary across banks, with some taking Rs. 5-10,000 while some going up to 1-1.15% of the loan amount for affordable home loans or loans against properties. There are also administrative charges for document examination, legal verification, property valuation, and more. Buyers should compare fees while checking their options for home loans according to him.
There is a foreclosure charge applicable if the borrower settles the loan before the conclusion of the tenure. Some lenders do not permit loan foreclosure until a particular number of home loan EMIs are paid. Most institutions do not have foreclosure charges for floating loans since they are not allowed by the RBI. Those offering fixed-rate home loans usually charge 2-6% as foreclosure charges based on the amount that is outstanding. There is also a part-prepayment charge imposed if the borrower pays a portion of the loan amount. This is charged upon fixed home loans in turn. The franking fee is payable to the bank for stamping the legal papers of the property upon confirming the payment of the stamp duty. The fee is usually 1% of the value of the home loan.
Registered mortgage represents another charge imposed on the home loan ticket size, while confirming that the property is pledged to the bank for getting the loan by the customer. The fee varies for various States while defaulters have to pay 2-3% of the EMIs that are unpaid each month. There is a conversion charge which applies if you convert the floating rate home loan to a fixed rate home loan. This may hover between 0.25-3%.
There is also a conversion charge which becomes applicable in case you covert your floating-rate home loan to a fixed-rate home loan. The charge may range between 0.25-3%.
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Published Date: September 1, 2022
