As is the case with almost every type of credit, even a Home Loan entails certain costs, other than the interest that you are charged for it. Given that most borrowers are focused on the interest rate as well as the documentation process, they may not notice some of these additional charges which are mentioned in the loan agreement. Since a Home Loan is a substantial credit involving an exceedingly high amount of money, it is in your best interest that you are aware of each and every charge that may be levied by your lender. Listed below are six such charges that you must take note of before signing the loan agreement.
It is a mandatory tax that is levied on any transaction pertaining to the purchase of a residential property. Passed under the Indian Stamp Act in 1899, this tax is levied on various transactions including the following:
The fee levied on each of these transitions varies from one state to the other. Hence, before Applying for a Home Loan, you should get in touch with the bank to understand the applicable fee in your state and plan your loan accordingly.
There have been instances in the past when an individual has applied for and availed multiple loans for a single property simply by approaching multiple lenders. To protect the interest of the lenders, the Central Registry of Securitisation Asset Reconstruction and Security Interest, better known as CERSAI was established in the year 2011.
The organisation is dedicated to maintaining a centralised database complete with the details of each and every equitable mortgage against a property. The organisation also maintains all the relevant information regarding the lenders, as well as the borrowers related to every property.
Hence, if a borrower approaches a bank for a Home Loan, the lender quickly runs a check with CERSAI to confirm if the property has already been mortgaged with any other lender.
In order for this process to work, the lender is required to register the details of any new property that has been mortgaged, within a span of 30 days from the date of the mortgage. Evidently, this process incurs expenses, which is why CERSAI charges 50 for all Home Loans under 5 Lakhs, and 100 for all Home Loan s above 5 Lakhs.
Unlike the one before, this is a substantial fee, which can have a significant effect on the overall cost of your loan. If you take a loan at a base rate, and later wish to switch it to the marginal cost of funds based lending rate (MCLR), or if you want to change your rate from fixed type to floating type, or vice-versa the lender will honour your request but at an additional fee.
This fee may range as high as 2% of the total outstanding amount. Most of the lenders often let the borrowers know, if they have an upper limit for the number of such changes, or if they have a limit on the frequency.
At the time of taking the loan, you are required to declare the mode of payment, which usually includes:
In case you wish to swap the mode of payment for your convenience, you should be aware that the bank may levy a fee of up to 500 per swap. While some banks might charge lower than that, there are a few who charge even higher. Considering that you will service the Home Loan for anywhere between 10-30 years, such a charge may prove to be taxing.
Regardless of the equated monthly instalment (EMI) repayment mode, in case of unavailability of sufficient funds in your account on the due date for the EMI payment, you will be charged a penalty, which could be as high as 500.
In case your EMI becomes overdue, you will be charged a penalty in one of the two ways listed below:
This interest does not include the actual Home Loan interest rate, and is charged distinctly.
We hope that you are now aware of the various charges pertaining to a Home Loan that may be levied on you from time to time. We are sure that this crucial knowledge will help you manage your Home Loan application and repayment more efficiently.
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