Every buyer who wants to buy a home needs a home loan, but the bank will never tell you about the hidden expenses. They want to keep things unfolding and then add these expenses. The processing fee is paid while applying for a home loan, however there are many hidden charges in home loans that you will learn about later. Learn more about real estate expert.
This blog has detailed 16 hidden charges that you may encounter at various phases.
Processing Fee
The first is the processing fee, which covers marketing and sales expenditures as well as administrative expenses for internal loan processing at the bank. Typically, a processing fee of 0.5 percent to 1 percent of the loan amount, plus service tax and surcharge, is imposed.
Administration Charges
Administrative charges are intended to cover the costs of the internal approval process, as once a loan application is received, the bank must internally process the loan for approval. Administrative charges are typically considered to be a component of the processing fee, which is recovered from the consumer. However, in some situations, the bank may charge administrative expenses separately. A bank may reduce its processing fee but recover its administrative costs.
Prepayment Fees
According to RBI guidelines, prepayment penalties are abolished for house loans with floating interest rates. However, most banks will levy a 2-4 percent prepayment penalty on fixed-rate home loans.
Late payment charges
If the EMI payment is not made on time, the bank levies a late payment penalty of 2% per month on the delayed time period, with a minimum penalty of Rs. 500.
Conversion fees
To entice clients, banks offer new customers their greatest interest rates. If you took out a home loan while interest rates were higher, you will pay a higher interest rate now that rates are lower.
However, if a customer wishes to convert an old floating rate to a new floating rate or an old fixed rate to a new fixed rate, a conversion fee of 0.5-1 percent of the existing loan amount would be charged. If you want to convert a floating interest rate to a fixed rate or vice versa, you’ll have to pay conversion fees of 0.5-1 percent.
Charges for MODT
A Memorandum of Deposit of Title Deed (MODT) is an affidavit sworn by the borrower stating that he has voluntarily deposited the property’s title deed with the bank in order to obtain a house loan. Stamp duty, which varies from 0.1 percent to 0.2 percent of the loan amount depending on the state in which the affidavit is registered, must be paid to register this document.
Charges for Document Retrieval
All records and crucial property documents, such as Sale Deeds and Sale Agreements, are kept in a central repository by banks. Because your bank will have these documents couriered back to the branch at the time of closure/pre-closure from their central repository. The bank would recoup these costs through document retrieval fees ranging from Rs. 250 to Rs. 500.
Legal Fee
Banks pay a legal charge to hire lawyers to verify the title of properties for sale against which they lend money. Some banks charge this legal fee to the customer individually. You will not be required to pay any such charge if your project has already been approved.
Inspection & Valuation Fee
The bank undertakes an independent assessment and physical inspection of the property before granting the loan. The the costs of valuation and inspection are recovered from the customers. You will not be required to pay this fee for projects that have been pre-approved.
Documentation Charges
Documentation charges, such as the Home Loan Agreement, MODT, and Indexing, are normally included in the processing fee. Banks may recover documentation charges separately to cover documentation costs in some cases.
Cheque Bounce Charges
If any of your repayment or security cheques bounce, you will be charged a penalty of Rs. 200-300 per cheque bounced, which would lower your CIBIL Score.
Changing the Term of a Loan
Changing the term of a house loan can lower or raise your EMI, and you may be charged a fee for doing so.
Charges for Switching Repayment Modes
If you change your payment method, you will be charged a switch fee. Swap charges of Rs. 250-500 would be charged.
Statement of account
The loan account statement is essential since it might be utilised for tax or other purposes. If you require a signed statement of loan account, some banks charge Rs. 100-250 each statement. Account statements, on the other hand, can be obtained for free through the online account.
Amortization Schedule Charges
Your bank will give you a repayment schedule once the loan has been approved. If you want an amortization schedule at any point throughout the loan servicing period, you will have to pay a cost of Rs. 100-300.
Copy of original documents
Because the buyer is required to produce original property documents to the bank, the bank may charge you for copies of your paperwork later, in case you need it. You should keep sufficient scan copies to avoid this.
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