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What Are the Charges Involved In Taking Out A Home Loan?

Posted by RudraRaghavan in Finance on December 10th, 2019

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You inevitably feel content when you apply for a home loan as it fulfils your dream of owning house in the country where the real estate prices are skyrocketing. In fact, home loan investments are considered one of the most crucial financial decision in an individual’s life. Plenty of savings is typically involved while applying for one. Although at the offsite it may seem like a massive financial burden, it is one of the cheapest loans in India owing to its interest rates, tenure, and repayment cycle. It is also a tangible asset as with time it tends to appreciate.

People avail of the housing loan as an investment. But many are unaware of the charges involved once the credit gets sanctioned. They are a long-term association with the lenders. The association lasts between 15 to 30 years. The applicants are generally cautious about the interest rates and tend to overlook the hidden charges, which do not get mentioned on the agreement as well. Before availing of the loan, become aware of the following expenditures –

  • Application fees: For doing verification, the lender requires preliminary expense which is called as the application fees. They vary between lenders and is affordable. 
  • Processing expenses: They the cost of credit appraisals and vary between lenders again. They are inclusive of taxes. The processing fees also depend on the applicant’s loan kind, income, and profile. 
  • Technical valuation charges: They are levied for assessing the property. In the case of a house loan, two valuations are typically formed for high-value properties. Based on the lower value between the two, the loan gets sanctioned. 
  • Administrative costs: The fee charged once the credit gets sanctioned called as administrative fees. The prices before disbursing the loan are termed as processing fees. They differ from lender to lender that which expense should they charge from the consumers. 
  • Balance transfer costs: If the borrower wants to change their lender owing to cheaper interest rates, they need to pay balance transfer costs for using the facility. 
  • Prepayment costs: Earlier, banks and NBFCs levied penalties for doing prepayment of the loan. Nowadays, based on RBI directive, some lenders do not apply the same. Here the borrower prepays the EMIs in part or full. A prepayment fee is charged for fixed rates and not on floating ones. 
  • Legal expenses: Some lenders charge a fee for scrutinising the legal documents for sale purpose. 
  • Franking fee: The amount is minimal and charged in the form of stamp duty on the property agreement with either builder or seller. However, the stamp duty charged is applicable only in certain states. 
  • Documentation charges: The expenses are nominal and done for getting the loan document signed as well as getting the ECS mandate activated. 
  • Recovery costs: If you default on the home loans in India for a month, then you need to follow some processes for recovering the costs. This is where the lender charges an additional recovery fee from the applicant.

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