10 Fees & Charges of Home Loan You Must Know about Before Applying
Buying a home of own is one of the biggest dreams for many people. Yet, we are in times where a home purchase had to be necessarily backed by a Home Loan. Applying a Home Loan is a seemingly complicated task, but with little guidance and some simple steps, everyone can easily understand the process and charges related to Home Loans.
Many people get confused about the various charges related to applying for a Home Loan because the process of fee collection in Mortgage is different from other loans like Personal Loan or Car Loan.
As of now, you can easily find a number of lenders offering really good deals on Home Loans in many places. Indiabulls Home Loan is one of the popular choices for first time home buyers. The company is well known for its helpful staff, simple process, and transparent charges. They are currently offering competitive interest rate on Home Loans starting from as low as 8.99%. They offer zero prepayment charges on loans. They also have more than 10,000 preapproved projects where Home Loan is available at a faster pace because the company has already done the builder side due diligence. Indiabulls also offers app-based loans.
Bank of India Home Loan is also a good choice for customers looking to finance their home from a Public Sector Bank. Their BOI Star Smart Home Loan is a premiere mortgage product. It comes with starting loan amount of Rs. 5 lakh for salaried customers and minimum Rs. 10 lakh for other income earners. Loan amounts are sanctioned up to Rs 3 crores for plot purchase. Repair renovation loans are available for up to Rs. 50 lakhs. A maximum loan amount of Rs. 5 lakhs is also available for the purchase of household items. The bank is committed to environment protection and offers solar panel Installation Loan at interest rates the same as Home Loan to its Home Loan customers.
Let us now look at some of the costs involved in Applying for a Home Loan. Commonly these charges could be related to the loan process, documentation, or government and legal charges.
- Application Fee: In some cases, this is also called the administrative fee, processing fee, or login fee. In most cases, it will range from anywhere between Rs 2500 to 6500. This is the charge taken by the lender to pay for the initial due diligence about the applicant as well as the project or property in question.”
- Insurance Premium: This is special insurance that the lender takes out on loan. In certain conditions, when the main applicant is unable to pay, the insurance pays back for the loan (commonly in the case of death of the original borrower). This insurance is meant to cover the risk of the lender. So even though the borrower does pay the premium, the proceeds of the insurance actually go out to the lender to cover the loan related amounts and balance.
- Prepayment Charges: Some lenders put in a specific amount of money as pre-payment charge in case the borrower wants to repay the loan amount early. This is not a common charge for floating-rate loans but when it is charged, you can expect to pay anywhere around 2% to 6%. In some cases, a partial prepayment charge is also considered applicable where the borrower wants to prepay only a smaller component of the outstanding amount.
- Conversion Charges: These are levied in cases where the borrower wants to change the interest rate levied from floating mode to fixed mode or the other way around. This is generally based on the MCLR involved and is only applicable if a change is initiated from the borrower’s end. In some cases, the conversion charge is also levied if a borrower wants to change the mode of EMI repayment.
- CIBIL Report Charges: The bank needs to check the Credit Score of the customers who apply to them for a loan. This is done through a CIBIL report. While most lenders cover the CIBIL fee in their processing charges, some lenders explicitly pass down this charge to borrower in the form of CIBIL Report charges.
- Stamping Charges: This is a legal fee that is charged to cover the cost of stamp papers which need to be purchased if bank needs to enter any legal agreement with you. Typically, you will be required to sign on a non-judicial stamp paper of value equal to the amount you paid as stamping charge.
- Income Tax Certificate Charge: This is an uncommon kind of charge meant for issuing a certificate to borrowers that they have paid certain amount of money for repayment of their Home Loan and are eligible to claim income tax benefits to a given extent. Generally the certificate is issued in computerised format like a pdf file. The fee is rare and only charged to cover the cost of printing the certificate and mailing it to borrower.
- NOC Charge: NOC or a No Objection Certificate is issued by a lender on the borrower’s request for specially identified purposes. Again, like Income Tax Certificate, this certificate is also generally free and is only charged to cover the cost of printing and to mail the certificate to the borrower.
- Document Recovery Fee: This is the fee charged to recover and return the original property documents to the borrower after the loan is repaid in full. Generally, this fee is waived off on customer’s request.
- Legal Fees: These are charged by the lender to cover the various legal expenses for drawing up the Home Loan agreement. These are to be paid directly to the lawyer at the time of the registry of the new property. They are charged on a fixed rate or very rarely as a certain percentage of the Home Loan amount.
In addition to these, banks or NBFCs may also charge inspection fees, architect fees, municipal valuation fees and some other charges which are either paid directly to the relevant party or are routed through the Bank or Housing Finance Company.
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