Home loans are not just a sum of money you get from the lender. It is a package of services and facilities, which help you buy a home. Naturally lenders charge different fees for those. You need to be aware of all those charges before taking any housing finance. These charges are not uniform across all lenders and vary depending on the lender and your loan amount. You should understand these charges before you decide to apply for your home loan. Here is a guide on home loan charges to help you understand them and count them while ascertaining your total cost of borrowing.
- Processing fee
This is the most important fee that lenders charge from home loan borrowers. This is the non-refundable fee that you need to pay when you apply for home loans. You do not get this fee back, irrespective of whether your loan is approved or not. The processing fee is usually a certain percentage of your total loan amount which includes all costs related to loan processing. Processing fees can also include ancillary charges like CERSAI and MOD charges. You must strive to get the lowest processing fee. You can also negotiate these charges from the lender.
- Prepayment fee
When you repay the home loan before the end of the tenure, it is called prepayment or foreclosure. However, when you opt for prepayment, the lender loses the interest revenue and so, charges a prepayment fee. The prepayment charges can be 2%-5% of the loan amount or a fixed amount determined by the lender. Before applying, you must ensure that these charges are low as they can significantly add to your borrowing.
- Late payment fee
If you do not pay the EMI amount on time, the lender charges you a late payment fee. This fee is calculated on the default EMI amount and is charged until you clear the due. It can be a percentage of around 2% per month as per the lender’s discretion.
- Secure fee
The secure fee is charged by the lenders who offer online services. The fee includes the cost of maintaining online payment systems and gateways. It also includes the cost of protecting their interface from hackers and malware.
- Technical and inspection fee
When you apply for a home loan, the lender closely scrutinises your application and the property in question to determine your home loan interest rate. Your property is also reviewed and inspected by a technical team. This team carefully reviews the property papers to ascertain its location, condition and resale value. Similarly, a legal team is hired to ensure that there is no encumbrance on the property and it has a clear title. The lender charges a technical fee from the borrower to cover the fees of the inspection and technical team.
Home loan charges can be daunting, but they are worth understanding and comparing as they can increase your cost of borrowing. Ensure to talk to your lender to know more about them while applying.