Are you planning to purchase your dream home? Then you may be interested in Taking a Home Loan.
Housing finance is readily available at competitive rates. Home Loans are available not only for the purchase of residential property but also for construction, acquisition of land and renovation of an existing property. No matter what purpose you wish to fulfill with the loan, you must make sure that you understand the various terms and conditions of the loan so that there is no dispute in the future.
One of the most important things that you must pay heed to is the charges applicable to the Home Loan. Most borrowers are oblivious of the existing charges and fees on Home Loan, so it is imperative to know about them before you sign the documents.
Here is a quick guide on 15 hidden Home Loan charges you should ask your bank before applying:
MOTD or the Memorandum of Deposit of Title Deed is an undertaking that the applicant provides stating that the property has been pledged to the bank on his or her own will to obtain a Home Loan. This document requires a stamp duty that varies from one state to the other, usually between 0.1% and 0.2% of the final loan amount.
Home Loans are generally offered on a floating rate of interest. In case the mark upon the base rate reduces over the years, existing customers also have the option of switching to the new rate of interest. However, you need to pay a conversion fee to reduce the interest payable each month. This is true to all loans, whether Yes Bank Home Loan or PNB Home Loan.
These charges are applied when you complete the loan tenure or if you choose to pre-close the loan. These charges cover the costs of transferring the property documents to the borrower from the central document repository of the bank.
Be it the valuation of the property or the validation of the different documents, banks hire legal experts to fulfill these requirements. There are certain charges applicable for the same which are usually borne by the applicant. Make sure that you are aware of these charges when you apply for the loan.
In order to complete the valuation process, a thorough inspection is conducted. The costs of hiring an expert to do the same are usually recovered from the customer.
These charges are not included with the processing fees. In some banks, you will have to pay added administration charges to make sure that all the costs of processing the application are completely recovered. Even if the processing fees are waived off, these charges will be applicable.
There are several documentation processes involved with a Home Loan including the agreement and the MOTD. There are some additional charges applicable in order to complete the documentation process.
You can alter the EMI that you pay each month by changing the tenure of the loan. In case you have access to extra funds, for instance, you can reduce tenure so that the loan is repaid faster. To make these changes, a fee is payable to the bank.
Customers can also change the package of the loan. For instance, you can shift from a floating interest rate to a fixed interest rate. For all Yes Bank Home Loans and Home Loans offered by other banks, a fee is charged to change the package. This is usually 1% of the total loan amount that is outstanding.
Finance experts will advise you to take a few copies of all your property documents before you submit them to the bank. Since you will have to provide the original documents to the bank, it may become a hassle to obtain them for any other purpose in the future. The bank also levies a document copy charge for every copy that you wish to take.
Home loans provide the option of making prepayments before the tenure of the loan ends. These are part payments, or you may also choose to repay the loan completely. However, prepayment charges are applied by certain banks to make up for the loss of interest as a result of early repayment of the loan.
Every year, you will be provided with an annual account statement. This one is not chargeable. However, if you misplace this account statement and require another one, you will have to pay a fee for the same. Banks usually charge up to Rs.500 to provide this statement of account.
Like any other loan, with a Home Loan, you have to bear a penalty in case of late payments towards the loan. Usually, banks will charge you a fixed base penalty rate along with a percentage of the loan amount that is currently outstanding as the late payment fees.
These charges are applicable in case of any defaults towards the Home Loan. The recovery process can be expensive for the bank, especially if the property needs to be sold or auctioned. These charges are recovered from the borrower to recover a part of the expenses or even the whole amount if the bank is under the SARFAESI ACT.
Along with tenure of your loan, you may wish to check the list of the original documents that you have submitted to the bank in order to avail a Home Loan. You will have to pay a fee to get the exact list of documents submitted.
Customers can ask for a list of all the charges before applying for a loan. With most banks, you can also check the various fees and charges on the website. This allows you to plan all the finances more accurately and will ensure that you do not have any rude surprises after the loan has been sanctioned and disbursed.
Also Read: 6 Home Loan Charges You Should Know
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