Home Loan

Interest rate can significantly influence the total cost of a housing loan. As home loans are usually of higher value and longer tenure, even a slight difference in its rate of interest can lead to long-term financial implications. Therefore, when looking for a home loan, you should choose the lowest rate on offer. Getting a housing loan at a lower rate of interest will not only reduce your outgoing EMIs but also the overall home loan interest pay-out.

Prospective homebuyers, usually, are more concerned about the home loan interest rates and tend to overlook other expenses involved in taking a home loan. These additional charges also make up the total cost of your housing loans with low interest rates and hence must be factored in when deciding on an offer. Below are some of the fees and charges that may be applicable to your home loan.

Application Fee is charged by lenders to cover all the preliminary expenses that they bear for conducting verification.
Processing Fee covers the cost of credit appraisal and depends on the borrowers’ credit profile, income and the home loan scheme. Also, not all lenders levy processing fees.
Administrative fee is charged by those lenders who split the processing fee into two parts. The part charged after the loan sanction is known as the administration fee. Citibank is one of the best banks to levy administrative fees.
Foreclosure/Prepayment Charges are levied when a borrower prepays the home loan either fully or partially before the end of loan tenure. Earlier, lenders used to charge prepayment penalties and foreclosure charges on home loans. But RBI banned lenders from charging individuals with prepayment penalties on floating rate home loans. As far as fixed rate home loan are concerned, some lenders levy these charges.
Repayment Mode Related Charges are levied when borrowers request their lenders to change their existing repayment mode during the loan tenure. The fee usually goes up to Rs. 500 per instance (swap) and varies from one lender to another.
Rate conversion/switching fees are charged when borrowers request their lenders to switch or reduce their existing interest rates due to various reasons. The fee varies from one lender to another and usually goes up to 2% of the outstanding principal amount.
CERSAI Charges (Central Registry of Securitisation Asset Reconstruction and Security Interest) is the central online security interest registry of India. Potential lenders visit CERSAI website to check whether the pledged property is not claimed by some other lender. For this process, the lenders pay a nominal fee, which they later collect from borrowers.
Overdue Charges on EMI are levied when a borrower misses or delays timely payment of loan EMIs. It attracts penal interest rates on the outstanding dues or overdue instalments over the prevailing loan interest rates. Therefore, borrowers must pay the loan EMIs on time.
EMI Bounce Charges are levied when you fail to make timely loan payments due to insufficient funds in your bank account. Lenders usually levy Rs. 500 on such defaults which may vary from one lender to another.
Legal Fee is usually included in the processing fee but some lenders charge it separately when they engage firms to scrutinise borrowers’ legal documents.
Franking Fee, commonly referred to as stamp duty fee, is a tax levied by the state government on any form of monetary transaction involving the transfer of rights of a property. The amount varies from one state to another and depends on state laws, type of property, etc.