September 2023
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Knowing the Charges Associated with Home Loan

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Availing a home loan is the best way to fund the purchase of your dream home. However, getting a loan comes with a cost. Read on to know more about the various fees that the lending institutions maycharge. 

If you have zeroed down on the dream home that you want to buy, you may start looking for the best offer on a home loan. Today, several financial institutions in India offer home loan at competitive interest rates. If you have no prior experience with availing a loan, it is paramount that you know about the different fees associated with it.

Some of the most common charges that the lenders’ levy is discussed below:

Processing Fees

The processing fees, as the name suggests, is the fee charged by lenders for processing the loan application. It includes the fees for verifying the documents, inspection of the property, vetting the financial statements, and administrative cost. The processing fees also cover the cost for printing and posting your loan statement. In India, the lenders can range from 0.5% to 2% of the loan amount you apply as processing fee. While looking for a lender, choose the one that has minimal processing fees.

Foreclosure Charges

If you repay the loan in full or in part before the end of the loan tenure, it is called foreclosure. While most lenders in India allow foreclosure of the mortgage after a specific period, the foreclosure charge is generally calculated based on the amount you are pre-paying and the outstanding amount and there may no charges for certain type of loans . The percentage of foreclosure fees varies from lender to lender, but it usually ranges between 0.5% to 2%. You must ask the lender about the foreclosure charges beforehand to make an informed decision on choosing the right lender. 

Legal Fees

Most lenders in India appoint a legal firm to scrutinise the legal documents and the property-related documents you submit. Generally, the lenders include the cost in the processing fee, but some lenders may charge it separately. 

EMI bounce fees

If there is a situation where your EMI cheque bounces, because of insufficient funds in your account. The lender may charge bounced cheque fees. Balance transfer fee

If you are not happy with the services offered by the lender or if you think the lender is charging a higher interest than the existing market rate, you can switch the loan to another lender. This is called balance transfer. But, when you transfer the loan to a new lender, you might have topay a balance transfer fee to the old lender to avail the feature.

Recovery fee

No matter, even if you avail the best home loan offer, if you fail to repay the EMI for a month, the lender will undertake certain procedures and levy recovery fee to cover the cost.

Technical evaluation fees

In case of high-value properties, the lenders conduct two valuations before approving the loan. Some lenders charge a separate fee for this evaluation.

 Please note that you must do a necessary evaluation of the charges and fees as it varies from one lender to another before you decided to apply for a home loan.

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