Home loans can be a great way to purchase your dream home, but it’s essential to understand what charges you may incur. Depending on your loan type, there are various charges associated with home loans that you should be aware of before making a decision. But always check home loan eligibility as eligibility criteria vary from lender to lender. This article will discuss some common charges you may encounter with a home loan.
Upfront Fees
Many lenders will charge an upfront fee to cover the costs of processing and approving your loan. It may range from a few hundred dollars to several thousand, depending on the size and type of loan. Before taking out your loan, understand this fee and ensure you can afford it.
Fees Contingent on Loans
1. Login Fee: Many lenders will require a login fee to process your application. It is usually an administrative charge ranging from INR 2,500 to INR 6,500.
2. Initial Home Loan Processing Fees: Home loan processing fees are charged when the lender first processes your application and may range from 0.5%-1% of the loan amount.
3. Insurance Premium: Depending on the loan type, you may be required to purchase special insurance coverage for your home loan. The cost of this premium will depend on the coverage and type of insurance chosen.
4. Late Payment Fee: A late payment fee will be charged if you fail to make payments on time. It is usually in the form of a percentage of the outstanding loan amount.
Fees Contingent on Documents
1. Stamping Charge: This fee is applicable in some states and is imposed on property documents. The cost of stamping will depend on the value of your loan.
2. Issuance Charge for Photocopy of Title Documents: These fees may be charged if you need additional copies of the title documents.
3. Prepayment/Foreclosure Charges: If you decide to pre-pay or foreclose your loan before the maturity date, you may be charged a fee. The amount of the fee will depend on your lender’s policy.
4. Account Maintenance Charges: This fee is charged for maintaining your home loan account with the lender. The fee amount will vary from lender to lender, so it is essential to confirm this before signing up for the loan.
Government Charges for Home Loans
1. Valuation/Inspection Fee: This fee is imposed by the government and is based on the value of the property you are applying for a loan against.
2. Legal Fees: A government-imposed fee for legal services related to the registration of your home loan.
3. MODT Charge: The Memorandum of Deposit of Title Deed (MoD) is an important document that confirms the transfer of ownership of a title deed from an individual to a bank or financial institution. This document is used as loan collateral, and the formal validation process requires it to be recorded on non-judicial stamp paper, which protects the rights of both parties involved.
Individuals need to verify the applicable fees for obtaining MoD in their state, as this service fee can vary depending on where one resides. To ensure all stakeholders are properly informed, it is suggested that individuals undertake proper due diligence when negotiating or procuring such documents.
4. CERSAI Charge: Obtaining a mortgage for your property is not as easy as it may sound. When applying for a mortgage loan, it is mandatory to register the charge with CERSAI, which stands for Central Registry of Securitization Asset Reconstruction and Security Interest.
It will guarantee that the same property you use to get your loan is not used as collateral for other debts or obligations. On creating an account in CERSAI, there is an application fee of INR 118, which needs to be paid before registering your mortgage charges. Therefore, one must also consider this and other costs associated with the loan when calculating their finances.
These are just some of the fees associated with a home loan. It is essential to research before taking out a loan, so you can be aware of all the costs and fees that might be associated. Additionally, make sure you get all the necessary information from your lender and ask any questions you have to avoid any unexpected charges. And also, check home loan eligibility criteria to get a clear idea of what you can and cannot do concerning your home loan. Knowing all the fees upfront will help you make an informed decision and budget accordingly. It, in turn, could save you money in the long run.
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