What Are The 17 Hidden Charges In Home Loan?
By Investoxpert | 13 Sep 2021 | Home Loan
What Are The 17 Hidden Charges In Home Loan, Home loan is a requirement of every buyer who desires to buy a home but the bank will never let you know about the hidden charges. They try to keep things unfolded and later on add these charges. While applying for a home loan is the processing fee but there are many hidden charges in home loan that you would come to know only later.
In this blog, we have covered 17 home loan hidden charges that you may come across at various stages.
Hidden Charges in Home Loan
1. Processing Fee
The first cost is processing fee that covers the marketing and sales costs and administrative expenses for internal processing of the loan at bank. Usually, processing fee is charged @ 0.5%-1% of the loan amount plus service tax and surcharge.
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2. Administrative Charges
Administrative Charges are meant for the internal approval process expenses as once the bank gets a loan application, it has to internally process the loan for approval. Generally, administrative charges are considered to be a part of the processing fee, which is recovered from the customer. But in some cases the bank can charge administrative expenses separately also. A bank may compromise on processing fee but will recover its administrative expenses.
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3. Pre Payment Charges
The RBI guidelines, pre payment penalty is waived off for home loans with floating rate of interest. However, most banks will charge 2-4% pre payment penalty on home loans with fixed rate of interest.
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4. Late Payment Charges
If there is delay in making the payment for t he EMI, then the bank charges late payment charges @ 2% per month on the delayed time period with a minimum of Rs. 500 penalty.
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5. Conversion Charges
To appeal the customers, the banks offer their best interest rates to new customers. If you had taken a home loan when interest rates were relatively high, you would be paying a higher interest rate when interest rates are low.
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But sometimes, the customer would like to convert the old floating interest rate to new floating rate or old fixed rate to new fixed rate, a conversion charges @ 0.5-1% of outstanding loan amount. Similarly, you have to pay conversion charges of 0.5-1%, if you want to convert floating interest rate to fixed rate or vice versa.
6. MODT Charges
Memorandum of Deposit of Title Deed (MODT) is an affidavit signed by the borrower that he has deposited the title deed of the property with the bank at his own will, in order to raise home loan from the bank. Stamp duty has to be paid to register this document and it varies from 0.1% to 0.2% of loan amount, depending on the state in which the affidavit is registered.
7. Document Retrieval Charges
Banks maintain all the records and important property documents like Sale Deed and Sale Agreements at their central repository. Because at the time of closure/ pre-closure, your bank will get these documents couriered from their central repository back to the branch. For that the bank will recover these charges by way of document retrieval charges @ Rs. 250-500.
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8. Legal Fee
The legal fee is given by banks to hire lawyers for title verification of properties for sale against which they lend money. Some banks charge this legal fee separately from the customer. If a project has already received the approval then you will not have to pay any such fee.
9. Valuation & Inspection Fee
Before sanctioning the loan, the bank conducts an independent valuation of property and physically inspects the property. The costs incurred in valuation and inspection are recovered from the customers. Again for pre-approved projects, you will not have to pay this fee.
10. Documentation Charges
There are documentation costs of Home Loan Agreement, MODT, and Indexing etc and usually it is a part of processing fee. Sometimes the documentation charges are recovered separately by banks to cover documentation costs.
11. Cheque Bounce Charges
Cheque bounce is not good and decreases the CIBIL Score, if any of your repayment or security cheque bounces, you will be charged a penalty of Rs. 200-300 per cheque bounced.
12. Changing Loan Tenure
Changing the time period of a home loan will either decrease or increase your EMI and you may be charged a fee for that.
13. Repayment Mode Swap Charges
There is a swap charges if you change the mode of payment. One will have to pay swap charges of Rs. 250-500.
14. Statement of Account
The statement of account is required as loan account statement can be used for tax or other purposes. Some banks charge Rs. 100-250 per statement if you want a signed statement of loan account. However, account statements can be accessed for free from the online account.
15. Charges for Amortization Schedule
Once, the loan is approved your bank will provide you with a paying back schedule. You will be required to pay a fee of Rs. 100-300 if you want an amortization schedule anytime during loan servicing period.
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16. Copy of Original Documents
The buyer has to submit original property papers; so the bank may charge to provide copies of your documents any time later. Ideally, you should keep scanned copy and a couple of printed copies of your documents before submitting your documents to the bank.
17. List of Documents
You may require the list of documents submitted with the bank while selling the property, transferring the home loan to another bank or for any other purpose. The bank may charge a nominal fee for providing such list.
Home loan hidden charges mentioned in this blog are suggestive and these charges may vary from bank to bank on regular intervals. We hope that you would find this information useful and will be better prepared while taking a home loan next time.
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