Home Loan: Fees and Charges

Posted by Sarita Yadav on October 23rd, 2021

Home loans applicants pay attention only to the interest rates while taking the loan and ignore other fees and charges, while these charges can significantly affect the cost of the loan. Apart from the interest amount, there are many other charges that banks and loan institutions may charge you at the time of applying for a home loan. Below is the information about similar fees and some charges on a home loan -

•        Application Fee:  This is charged by banks or other lending institutions to cover all the initial expenses that are incurred for completing the verification.
•        Processing fee:  This is for the cost incurred on credit appraisal, and depends on the credit profile, income, and home loan scheme of the borrower. However, not all banks and other financial institutions charge processing fees.
•        Administrative Fee: This is levied by loan institutions that split the processing fee into two parts. The portion levied after the approval of the home loan is known as the administrative fee.
•        Foreclosure Fee:  This fee is to be paid when one pays the housing loan Offer before its stipulated period. Earlier banks or NBFCs used to charge pre-payment penalties and foreclosure fees on home loans, but RBI has barred banks or NBFCs from levying pre-payment penalties on floating rate home loans. As far as fixed-rate home loans are concerned, some banks charge these fees.
•        Change of payment mode fee:  This fee is levied when the borrower requests to change his existing payment mode during the loan tenure. This fee is usually Rs.500. Happens till. It varies from bank to bank and other lending institutions.
•        Fee for reducing or changing the interest rate:  This fee is levied on the borrower when he requests his bank to change or reduce his existing interest rates for various reasons. This fee is levied differently in different banks and is usually up to 2% of the outstanding principal amount.
•        CERSAI Fee:  CERSAI (Central Registry of Securities Asset Reconstruction and Security Interest) is India\'s central online security interest registry. Banks and NBFCs check the mortgaged property by visiting the CERSAI website to see if the property has been claimed by any other bank. For this process, banks pay a nominal fee, which they later collect from the borrower.
•        Additional Charges on EMI:  When the borrower is unable to pay the EMI or pays the EMI late, additional charges are levied on the outstanding EMI. Therefore, EMI should be paid on time.
•        EMI Bounce Fee: EMI Bounce Fee is levied when you fail to make the loan payments on time due to insufficient funds in your bank account. In case of bounce, the bank usually charges Rs 500. Takes fees. This fee varies from bank to bank.
•        Legal Fee:  This fee is normally included in the processing fee, but some banks charge it separately when they take the help of a legal firm to verify the legal documents of the borrowers.
•        Franking Fee:   It is commonly defined as the stamp fee charged by the state government on the value of sale whenever a property is bought or sold. This amount varies from state to state and depends on state laws.