Home loans: Costs and different charges relevant on House mortgage
Home loans: Charges and other fees applicable on Home loans
While comparing home loan offers of different banks or financial institutes we compare the same only on the basis of interest rate to be charged on the same.
There are many other charges & fees charged by banks on home loans which we generally don’t take into consideration. You should not neglect these charges for selecting any offer among the various banks or financial institutes.
Below is the detail of all the charges and fees applicable in home loans other than only the rate of interest:
Processing Fees of Home loans:
Every bank or financial institute charges a processing fee on each and every home loan application, this is an important expenditure to keep in mind while comparing the home loan offers. Every bank charges the processing fee on different percentages; it varies between 0.25% to 1% of the loan applied for.
Bank charges processing fee to meet out expenses to occur for the entire process of home loan. This fee is non-refundable whether the home loan application gets approved or rejected on any account.
Administrative ChargesHome loans :
There is one more charge called Administrative fee charged by the bank at the time your loan gets sanctioned. Presently almost every bank and financial institution have removed this fee but you need to cross-check the same at your level if the bank is charging this fee or not before submitting your loan application.
Prepayment charges for early payment
Bank grants you’re a home loan for a specific tenure it relies on that the loan will be for full-term and the borrower will repay it to the bank through monthly EMI along with the interest to recoup the cost of funding the home loan and of course, interest is income for the bank.
Earlier banks use to charge prepayment penalties on the early discharge of loans at a high percentage as banks lose their future income. But RBI as per its recent guidelines has now removed this charge subject to prepayment of a maximum of 25% of the balance outstanding principal in any given financial year with a condition that the borrower pays the same with his own funds or savings. You should not neglect this charge also.
Bank does the legal and technical verification of the property (which is to be mortgaged by the borrower as security for a home loan) to verify the clear title and to ascertain the property market value also. Bank will occur some expenses for the same, so the bank will charge this fee from the borrower.
But in case you have finalized a property being constructed by a builder of which the project (in which you have finalized the property) has already been approved by the bank then there will not be any legal charges involved as the builder has already paid the total legal charges while applied for project approval as a whole. So cross-check for the legal charges with all the banks.
Ongoing fees account keeping fees
You may incur account-keeping fees on your home loan account. Account keeping fees will usually be added monthly to your home loan account.
Ongoing fees package fees
If you have your loan packaged with other banking products, such as a savings account and credit card facilities, you may be charged an annual fee to cover the costs of the package. Generally, if you are paying package fees, you will not be charged account-keeping fees.
Account transaction fees
You may be charged a fee for certain account transactions, such as redrawing money from your home loan. These fees are usually based on usage.
A switching fee may be charged if you switch from one product to another within the same lender e.g. variable rate to the fixed-rate home loan. This fee covers the administration costs of the lender.
Government and statutory charges
As part of purchasing property, you may be liable for a number of government and statutory charges, including transfer stamp duty, mortgage stamp duty, and mortgage registration fees. You can read more about each of these charges on our stamp duty page. You can also estimate your liability using the stamp duty calculator.
Delayed payment Charges:
When the bank disburses the part or total amount of your loan, you need to repay in Equated Monthly Installment to the bank every month (every 5th or any other date of every month) through ECS or Post-dated cheques.
If in any month there is any delay in repaying the same bank will charge the delayed payment charges for the same. Consider this charge also when you are applying for a home loan or comparing the home loan offers of various banks.
EMI bounce charges:
If in a given month your EMI gets bounced bank will charge the penalty for the same between Rs.250 to Rs.500 or more for every bounced cheque or EMI. Also if your 3 EMIs get bounced bank can send you a legal notice for default in repaying the loan. So you should plan your EMIs accordingly.