By With home loan interest rates at a record low, homebuyers are looking to finance their dream house purchases. While borrowers mostly focus on paying off the loan through EMIs, lenders levy several other charges on home finance as well. It is vital to understand the additional costs applicable, before choosing a lender. Read on to know more about these charges.
| Documentation charges |
Lenders charge a nominal documentation fee for signing the loan documents and activating the electronic clearing service (ECS). Any amount ranging from Rs. 500 and Rs. 2,000 can be charged. A documentation retrieval fee is also applicable to your loan. This charge covers the expenses required by the financial institution to safely keep the original loan documentation throughout the tenure at a central location. Lenders typically involve and pay third-party services to carry this out.
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| Processing fee |
This covers the cost of credit appraisal and verifying your loan application and paperwork. While some lenders charge anything between 0.50% and 1% of your loan amount as a processing fee, others levy a flat fee. It is charged after your loan application is approved. |
| Administrative charges |
Sometimes lenders split the home loan processing fee into two. Here, administrative charges are levied after your home loan is sanctioned.
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Application charges |
Also known as a login fee, this is a non-refundable charge levied when you apply for the loan. It is worth noting that the borrower has to pay this fee even if their loan application is rejected. |
| Legal and technical valuation fee | After you submit the required legal paperwork to the lender, legal experts examine these documents. Lenders charge a legal fee for this.
Lender employs engineers and technical experts to analyze the worth of your property against the actual cost of the house and the loan amount applied. It entails a technical assessment fee. These verifications determine your home loan eligibility as well. |
| Late payment charges | The penalty is applicable if you delay your EMIs. It is also known as a recovery fee. |
| Franking charges |
While processing your loan application, lenders levy charges commonly known as stamp duty fees. This charge is a tax levied by the state governments and vary from state to state based on the type of property, state laws, location etc. |
| Rate conversion/ switching charges |
Often borrowers opt for a loan transfer to avail of lower interest rates and reduced home loan EMIs. Lenders charge a switching/rate conversion fee. The conversion charges can go up to 2% or more of the principal amount. The costs vary from one lender to another. |
| CERSAI charges |
Central Registry of Secularization Asset Reconstruction and Security Interest tracks and prevents frauds in lending. Lenders register the loan details with the central body. Borrowers are charged a nominal fee for the process. |
Summing up
The loan agreement mentions these charges in detail. It is crucial to read the fine print before signing the dotted line. Since home finance usually extends for longer periods, you can also use a home loan EMI calculator to get hold of your future expenses.
