Home Loan Charges: Know the Total Cost of Your Loan

In addition to the equated monthly installment (EMI), there are other fees in a home loan. These fees will differ between lenders (banks, housing finance companies, and non-banking finance companies). At the same time, some fees of home loan in India are connected as a fixed percentage of the home loan balance. But others are not. These fees will increase the overall cost of the loan, thus it is crucial to be aware of them.

Here are different fees that a borrower will have to pay while their home loan application is being processed. (Remember that not every borrower may be subject to all of these fees. Thoroughly review your loan documentation to understand all fees.)

Login fee

This first fee, also known as an application fee, is levied by a lender to assess the loan application. At this point, the lender determines whether or not the application contains all the essential documents. Also relevant, accurate information for processing.

Processing charges

The one-time price that lenders charge applicants for processing their home loan applications is referred to as a processing fee. Typically, this cost is non-refundable. This charge may equal up to 3% of the loan amount, depending on the lender. On special events or throughout the holiday season, certain lenders will also waive the processing cost. 

During the credit underwriting process a loan application is reviewed on a number of criteria. This requires labor and resources and includes other factors. This includes KYC verification, financial assessment, employment verification, dwelling and office address verification, credit history assessment, etc. Through the processing fee, a lender is able to recoup all of the expenses associated with the credit underwriting procedure. 

Technical assessment fee

The physical condition and market worth of the property for which a home loan is taken are evaluated by technical specialists. These specialists are employed by the lenders. These professionals assess the property based on a variety of criteria. This includes legislative approval, layout approval, building specifications, adherence to construction standards, and more. Through a variety of methods, including the cost of the land and the construction. They also estimate the property’s market value. A few lenders charge this fee separately, however, the majority incorporate it in their processing fee.

Legal fee

The most crucial task for a lender is still to confirm that the property is free of any pending litigation. In order to accomplish this, lenders employ licensed legal representation who investigate pertinent legal issues. These includes the validity of the title deed, the thread, and depreciation of property ownership, the no objection certificate, the occupancy certificate, etc. and provide the lender with a final opinion on whether or not they should proceed with the lending. Most of the time, lenders demand that borrowers pay the hired legal expert directly.

Foreclosure charges

In the event that a borrower repays their entire loan amount before the term has expired. This fee is assessed as a penalty. Some lenders won’t allow the loan account to be foreclosed until a certain amount of EMIs has been paid. However, banks and Housing Finance Companies are not permitted to collect foreclosure fees on variable interest rates under RBI regulations. Lenders who offer fixed-rate loans are permitted to impose foreclosure fees as they see fit.

Partial prepayment charges

In the event that a borrower prepays a portion of the loan amount, this fee is assessed as a penalty. If taken out by individuals, floating rate home loans are immune from penalty fees. Lenders may impose a prepayment penalty. While the loan is still within the fixed interest rate phase if borrowers choose a dual-rate home loan. The banks and HFCs are not permitted to impose a prepayment penalty. Once the loan begins to accrue a floating rate.

Default interest/late payment

Penalties are assessed on overdue EMIs when monthly home loan installments are late. This fee may be either a set sum or a predetermined percentage of the outstanding EMI (s). 

Conversion charges

When switching from a fixed-rate home loan to a floating-rate one or vice versa. or when switching from the current fixed interest rate to a revised one, banks and NBFCs levy conversion fees. 

Statutory or regulatory charges

These are the fees the lender will collect on behalf of the statutory bodies. The majority of it is paid to the government in the form of stamp duty and GST. These are paid on different fees that are collected by the lender.

Re-appraisal fee

The approval of the home loan application has a finite window of time. If your loan is approved but you wait a long time to accept the disbursement. the lender will reevaluate your loan application. The length of this time varies amongst lenders and often ranges up to six months.