A Snapshot Of All The Charges And Fees Your Home Loan Incurs
Thanks to the convenience offered by home loans, one need not wait for several years to be able to purchase one’s dream home. However, most lenders charge various hidden costs and other charges apart from home loan interest rates. Potential buyers must be aware of these costs in order to secure their interest and avoid being exploited. Contrary to popular belief, one can also incur these charges when applying for a home loan online.
Here are all the charges and fees you should know about:
- Processing Fee: In general, a processing fee can be defined as a charge or a cost that is incurred while processing a particular application. In the case of loans, this is the fee levied for processing the loan. Lenders usually charge this fee to cover the costs that they would incur for processing your application. These costs usually include the cost of credit cheques and even basic administrative costs. The processing fee for a home loan application ranges from 0.5% to 1% of the loan amount disbursed.
- Prepayment Fee: Prepayment is when a borrower pays the outstanding loan amount in part or even in full before the stipulated time period. Certain lenders levy fees for prepayment of the home loan. This charge is generally levied on loans that have a fixed rate of interest as compared to floating rate. The lender charges this fee in order to secure his interest as prepayment causes him to lose out on the gains from interest rate over the years of repayment. This fee can potentially be equivalent to a few months’ worth of EMIs.
- Fee for home loan balance transfer: A balance transfer is when a borrower seeks to change the lender of the existing loan and move to another lender to gain from lower interest rates. The amount of this fee varies from lender to lender. It is charged to secure the interest of the lender as, after a balance transfer, he/she loses out on the potential interest gains that were decided upon when signing the loan contract.
- Charges of technical valuation: Technical valuation is the process of evaluating the property you are purchasing in monetary terms. This process often requires a professional like an architect, engineer or even an accountant. In such a case the technical valuation charge is the fee which is paid to the expert technical valuator. The lenders incur this fee and pass it on the borrower of the home loan.
- Legal Fee: As with any financial transaction, taking a home loan entails several legalities. The costs of completing these formalities fall under the legal fee charged by the lender. For example, the scrutiny of various legal documents would cost a certain amount that would be paid by the lender during processing, but later be passed down to the borrower when agreeing upon the final contract.
- Franking Fee: When completing a home loan transaction and purchasing a property, the buyer has to certify the payment of the stamp duty of the premise. Stamp duty is a tax that is levied during the sale or transfer of a particular real estate property. The franking fee is approximately 0.1% to 0.2% of the overall loan amount.
Apart from these costs, you may also need to pay an EMI bounce charge, which is usually around Rs.1000 for missing an EMI payment, as well as a penal interest of 2% p.a. Some lenders may also charge a secure fee. Now that you know all the costs that you would incur when borrowing a home loan, choose a lender who is transparent about all costs and charges. You can borrow a home loan instantly from Bajaj Finserv at affordable interest and no hidden costs.