In India, most home loan applicants have no idea about the various charges associated with their loans. Read on to know more about the different costs associated with a home loan.
Most homebuyers in India rely on a home loan to fulfil their dream of becoming a homeowner. It is one of the most feasible ways to get the necessary funds to buy a property, as it allows you to repay the amount in easy monthly instalments. But, when you apply for a home loan, apart from the interest rate, there are many charges that you are liable to pay, which you may not be aware of until you approach a lender. These charges constitute a significant amount, and when you are preparing the budget for a home loan, you must account for these charges.
So, if you are applying for a home loan, you must be aware of the below-mentioned charges to plan your finances well and avoid any last-minute shock.
- Loan Processing Fee
This is one of the most common charges that the lenders levy. It is a non-refundable fee, and the fees charged are usually about 0.50% of the loan amount you apply. Some lenders even charge a fixed amount. The processing fees are charged in lieu of the loan-related services offered by the lender, including verifying your application, reviewing the financial documents, etc.
So, when you are looking for the best home loan offer, make sure that you look for a lender with the least processing fees, as it can significantly increase your overall loan cost.
- Delayed EMI payment
If the EMI cheque bounces due to insufficient balance in your account or for any other reason, if you cannot pay the EMI on time, the lender may levy a penalty on late payment or delayed payment. The penalty can be up to 24% additional interest per annum. So, make sure that you never delay the EMI payment and always ensure that you have sufficient balance in your account before the due date.
- Property Insurance
Today, most home loan lenders in India require the applicants to purchase property insurance; it is one of the pre-requisites for loan approval. You must pay the insurance premium directly to the insurance company regularly to keep the policy active always throughout the loan duration.
- Conversion Fee
If you wish to change the interest rate on your loan and benefit from the falling interest rate, you can do so by paying a conversion fee. The fee depends upon the difference between the old interest rate and the revised interest rate. Today, most home loan borrowers switch to a new lender when the interest rate falls to avoid paying this fee. However, you must know that the new lender may charge you a processing fee. So, before you switch your loan, calculate what is beneficial, and take an informed decision.
- Legal Fees
Most lenders in India appoint an agency or a firm to scrutinise the borrower’s legal documents. Usually, lenders include the legal fees in the processing fees, but some lenders may charge it separately. So, it is vital that you speak to the lending authority beforehand about the various charges involved to get a clear picture of the costs involved.
- Technical Evaluation Fees
If the property that you wish to buy is a high-value property, then the lenders usually conduct two evaluations and consider the lower of the two for approving the loan. Some lenders charge a separate fee for this evaluation.
- Notary Fee
This is applicable for NRI home loan applicants only. If you are an NRI, you may need to notarise your KYC (Know Your Customer) documents from the Indian embassy or a local authorised notary entity abroad.
Thus, there are several fees associated with a home loan. Do your research well, and find out about the lender-specific charges and prepare your budget accordingly.