There are many costs that make up your cost of borrowing for a home loan. While you might know about the general cost like interest rates, and principal amount, there is much more to it. There are various fees and charges that are included in the loan amount which you may or maynot know about. Having an idea of all the mentioned and hidden fees and charges of home loan is crucial to budget purchasing the house. Here is a list of charges that you may need to pay while getting a home loan.
- Processing fee
You need to pay a processing fee for any loan you avail. This includes all the miscellaneous expenses that the lender incurs to lend you the money, like the cost of doing the due diligence of the applicant or property in question. It is usually 1.5%-2% of the loan amount. Some lenders also charge a fixed amount as a processing fee. You do not get this fee amount back if you do not avail the loan or if it’s not approved. In short, it is a non-refundable fee charged by the lender. However, upon request, some lenders waive the processing fee. It is also called as administration fee or application fee.
- Stamp duty and registration charges
After you buy a house, you need to pay the stamp duty and registration charges for the same. Without paying these two, the ownership is not transferred in your name. The stamp duty charges vary between 4%-7% and the registration charges are 1% of the property value. Stamp duty and registration charges are to be borne by the borrower as these are not included in a home loan.
- Technical fee for property
The lender reviews your property value with the application form to reject or approve the loan. They scrutinise it closely to judge the value and location of the property to gauge its resale value. However, your property is also checked and inspected by legal and technical experts. The charges incurred to pay the experts for this property inspection are included in your total cost and home loan fees.
- Late penalty
One of the crucial home loan fees and charges is a late penalty. If you delay making EMI payments, you can be asked to pay a late penalty. The amount of late penalty can be a percentage of the instalment due or a fixed amount.
- Incidental charges
Banks charge specific fees as per their policy and requirements. For example, banks can also charge you incidental charges to cover the risk of default or cover the cost of recovering the loan amount.
All these fees are mentioned in fine print in your home loan agreement. You must read about them and ask the lender in case of doubts. Being aware of these fees while you apply for home loans would help you estimate the entire cost of your loan accurately.