All About Home Loan Charges and Expenses
Acquiring a Home Loan doesn’t only involve the cost of home loan interest rates but it also includes other charges & fee accompanying at various stages of taking the Home loan. You must consider all these charges while comparing the cost structure across banks. Following is the detailed fee structure incurred by banks at different loan stages:
1. Processing Charge: It is a fee payable at the time of submitting the Home Loan application to the bank that is normally non-refundable. The fee ranges between 0.5 per cent and 1 per cent of the loan amount.
2. Administrative Fee: It is a fee incurred by banks at the time of loan sanction; there are few banks who have removed this fee so you must check it with all the banks.
3. Prepayment Penalties: When the borrower pre-pays the loan before the loan tenure, banks charge a penalty that usually varies between 1 per cent and 2 per cent of the pre-paid amount.
4. Legal Charges: Banks also incur some charges from the customer for legal and technical verification of the property.
5. Delayed payment Charges: When there is a delay in the payment of your EMI, banks charge a late payment fee from the borrower that normally ranges from 2% to 3% of the EMI.
6. Cheque bounce charges: Banks charge between Rs. 250 and Rs. 500 for every bounced cheque towards the Home Loan payment because of lack of funds in your account.
7. Insurance cover (an added cost): Also, many banks may insist on getting your home insured to safeguard their interest. There are various kinds of insurance covers available to you. Apart from getting the mandatory ones you should try to get insurance as per your circumstances. You also have a choice of getting insured from another company without any objection from your bank.
Processing fees, administration fees, valuation fee, legal fee, is to be paid when you apply for a Home Loan and other fees paid at closing. Many of these fees are negotiable. You should ask for zero processing fees and zero-penalty for pre-payment option. If this were not available, then lowest cost would be better.
Make sure you work out as to how much these other costs add up to. So even though the interest rate may be lower, it usually adds up to being expensive. If the EMIs may come out a lot more than what you can afford on a monthly basis; try to redo the math with changes in the tenure and loan amount (if possible).
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