Are you thinking to fulfil your long cherished dream of buying your own home? For that, are you planning to apply for a home loan or thinking to avail one soon? Do you know the total cost of getting a home loan and various charges associated to it? If not, let’s make you aware of your home loan cost and different charges that shall accompany your home loan.
When you take a home loan, you have to pay a monthly EMI i.e. Principal plus interest amount. You already know that! But, there are few other significant costs that you need to bear along with your equated monthly instalments. Few of them may be in the form of one-time fee only. Also, all of them may not be applicable in every case, still there’s no harm in learning about each of them.
Let’s take a look at the numerous fees & charges that lenders expect you to pay. Some while applying for a loan and few after getting the loan, as may be applicable.
Home Loan: Fee & Charges to Know
1. Home Loan Processing Fee:
Home Loan processing fee is the price that has to be paid to the bank or lending institution for processing your home loan. This is usually calculated as a percentage of total loan amount and ranges between 0.25 to 1% only. E.g. If the loan amount is Rs.10 lakhs and processing fee is 0.5% then Rs.5000 adds up to your cost.
Some lenders may charge a flat processing fee up to a fixed amount of loan. This fee may be based on borrower’s profile, total income and the type of loan.
2. Administrative fee:
Although, this is normally a part of the processing fee. But, few lenders split the processing fee and the one that is charged after the loan gets sanctioned is termed as administrative fee.
3. Legal Fee:
The fee paid to get the property documents verified and scrutinised is referred to as legal fees. Most of the lending institutions appoint legal advisors to scrutinise the borrower’s legal documents like agreement of sale etc.
4. Technical Valuation charges:
Technical evaluation of the property you intent to buy is usually done by an architect, engineer or an accountant. They check the legality and fair market valuation of the property. This is common in case of high-value properties and the evaluating expert offers his services for a technical valuation fee.
5. Franking Fee:
The fee to certify the payment of stamp duty by the property buyer is called franking fee. It usually ranges from 0.1%- 0.2% of the loan amount.
6. Home Loan Insurance:
Insuring your home is a good practice. Your home needs to insured against any natural calamity or potential threats. While Home insurance protects your home, the home loan insurance insures you against your home loan liability.
Lenders insist on home loan insurance to avoid seeing a loan turning into bad debt in an unforeseen situation. The insurance premium cost of home loan definitely falls on your shoulders. The premium may differ as per your loan tenure.
7. Indemnity cost:
As a borrower, you need to indemnify the lender against certain risks like delay in approval or property tax still to be paid by seller. To cover up these events, you have to bear an indemnity cost as well. So, this also adds up to your housing loan cost.
8. Documentation Fee:
Some lenders charge a small documentation fee for services offered like getting your home loan agreement signed, activating ECS mandate. There might be minor charges for carrying few other formalities as well.
9. Goods & Services Tax (GST):
The different kinds of fee that you pay for getting a home loan shall be topped up by Goods & Services Tax (GST) @ 18%.
10. Sundry Charges:
Sundry charges like cheque return charges, document retrieval charges, statement of account charges, charges for late payment etc. may apply, of course after your loan gets sanctioned.
Apart from the above, the banks or other lenders may charge additional fee in case of Non Resident Indians (NRIs). These include Notary fee, Adjudication fee that are to be paid on behalf of NRIs for availing different services.
Home Loans: A Final Verdict
No need to get scared looking at the long list of charges accompanying your home loan. Although, you are bound to incur some of these costs, but not all. So, this particularly varies as per your individual case.
No doubt, a home loan acts as a wonderful financial tool to attain your housing goals. No pleasure can replace the joy of living in your own sweet home. Of course, it comes at a cost! You may also gather important home buying tips to take a wise decision.
In fact, home loans take us closer to achieving our housing dreams. So, there’s no need to worry when you have a good and reliable financial support in the form of an easy home loan facility knocking at your door.
If you can learn to manage your expenses well, you can place yourself in a better financial position. Go ahead and turn your housing dreams into reality! Start planning wisely to invest to buy your house. Just remember to do a complete homework and gather useful details before grabbing a good housing loan.