PremiumWe have collated a list of fees and charges that are typically applied on a home loan sanction – both before and after disbursal. While the list can defer from lender to lender, borrowers can still expect to pay at least 90% of these charges
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When we start planning for a Home Loan, we often limit our budgeting to the EMI repayment part. However, these are not the only costs borrowers bear. While Home Loans continue to remain one of the most affordable funding methods to assist in our home buying dreams, it is crucial that we account for overhead charges to avoid breaking the bank for last minute surprises.
While the cost of borrowing a home loan is mainly determined by the rate of interest, borrowers should also consider the additional charges lenders levy on the sanction before making their choice. One is advised to not restrict their preferences to only those who offer low interest rates. Several other important, albeit hidden, issues also affect the overall cost of borrowing. To be a savvy borrower, ensure that you stay updated with the fees and charges you may be expected to pay to avoid upsetting your loan budget allocation.
We have collated a list of fees and charges that are typically applied on a home loan sanction – both before and after disbursal. While the list can defer from lender to lender, borrowers can still expect to pay at least 90% of these charges.
Additional Charges Applicable on Home Loans
Before we delve deeper into what each fee and charge entails, let us bifurcate the charges, based on what phase of the Home Loan you can expect to pay it.
Here is a comprehensive list of the miscellaneous charges on your home loan:
Processing Fee
Once you submit your home loan application, it undergoes a stringent process of approval where lenders assess the applicant’s creditworthiness along with authenticating their supporting documents. A specific amount is charged for this verification, known as a processing fee. This is usually a percentage of the home loan principal amount, which can go up to 7%. In some instances, lenders may choose to waive the processing charges, but charging a processing fee is standard practice. However, it must be understood that paying a processing fee does not guarantee approval on your home loan.
Home Loan Administration Fee
The Administration fee can be seen as a variation of the processing fee. Some lenders may just levy the latter, while others may split it into processing fee and administration fee. Administration fee is typically about a percent of your home loan sanction amount and is charged post disbursal.
Stamp Duty and Registration Charges
After the sale deed is registered with the sub-registrar, the lender keeps the original documents as security until full repayment of the home loan. The buyer executes a memorandum of deposit of title deed (MODT) to formalise this arrangement. Stamp duty and registration charges are levied as per the applicable state laws, which vary and are state-specific.
Technical and Legal Assessment Fee
Lenders evaluate the property in question with the help of technical and legal experts. This is done to verify home ownership title and the financial worth against which a housing loan can be approved for the desired amount. Most lenders charge a flat fee for this purpose.
Documentation Fee
The documentation fee you pay is to enable the verification of the relevant documents and activating the electronic clearing service (ECS). This also includes the cost of keeping the original sale document safe at a central location for the entire duration of the loan term.
Credit Score Report Charges
Your credit score determines your eligibility for securing a loan approval. Lenders levy credit score report charges when they pull up credit scores of applicants through the credit bureau, namely CIBIL.
Fee for Change of Home Loan Tenor
Sometimes, whilst servicing a home loan, borrowers may wish to extend or shorten their original loan tenor due to a sudden change in their financial situation. At such times, lenders may impose a fee for changing the loan tenor.
Interest Rate Conversion Fee
If borrowers wish to link their existing home loan to the prevalent lending benchmark such as the RBI repo rate, lenders are likely to charge a conversion fee.
Late EMI Penalty
Any delay in EMI payments results in defaults and penalty. In this regard, most lenders charge a fixed sum, while others may levy a certain percentage on the amount of EMI due.
Home Loan Prepayment Charges
The RBI restricts lenders from levying prepayment charges on individual home loan borrowers with a floating rate of interest. However, those availing of a fixed interest rate home loan can be charged a prepayment penalty, which is generally, a percentage of the outstanding loan amount.
Loan Account Statement Charges
Borrowers may, while still repaying the existing loan, consider shifting the loan to a new lender who offers better services at lower interest rates. But, first, the new lender will need to check your repayment records to assess eligibility before approving the home loan balance transfer. In the absence of any documentary proof for the same, your previous lender will charge a fee to issue copies of your loan account statement. A loan balance transfer charge will be levied as well.
Re-Sanction Fee
Once the lender issues a loan sanction letter, borrowers must get the loan disbursed within a predetermined time period. Failure to do so can result in expiry of the sanction validity and one can obtain a loan sanction again upon paying a re-sanction fee.
Cheque Bounce Charges
If the cheque for your home loan EMI payment bounces, you are liable to be suitably fined.
Incidental Charges
In case of loan defaults, lenders levy incidental charges to cover the expenses associated with the recovery of dues from defaulters.
Summing Up
It is prudent for borrowers to understand the miscellaneous charges applicable on home loans to plan their finances better. Since some of these fees may vary across lenders, check with the lender well in advance, and identify these expenses to factor them into your loan costs.
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