Home loan charges: All you need to know

Let's take a look at some important charges borrower have to pay on their home loan

Home loan charges: All you need to know
Buying a home is a dream for almost everyone.

Buying a home is a dream for almost everyone. When you avail a home loan, other than the interest rates, one must pay various charges. These charges will vary across lenders. Some lenders may levy charges separately while others may club them together.

Let’s take a look at some important charges borrower have to pay on their home loan

Application fee: This is an initial fee charged by the lender to check whether the application has all the relevant documents for further processing or not.

Processing fee: Before approval, all loan applications have to go through a credit underwriting process which involves manpower and resources. Through the processing fee, lenders recover all these costs related to the underwriting process.

Valuation fee: Before approving any home loan, lenders take assistance of technical experts to assess the value of the property for which a home loan is taken. Lenders charge this separately from applicants. In some cases this charge is included in their processing fee.

Prepayment charge: If a borrower pays off a home loan in full before the end of the tenure, some bank charges a fee. It ranges between 2% to 6% of the outstanding amount. But now most banks charge no prepayment fee for floating rate loans for individual borrowers.

Conversion charges: This is also known as switching fee. If a loan borrower wishes to convert floating-rate to a fixed-rate or vice versa, he/she is charged by the lender.

Regulatory charges:  It is mostly in the form of stamp duty and GST on various charges which are collected by the lender and paid to the government.

Late payment charges: This is the charge the borrower has to pay in case of default on the loan payment. The late payment charges vary between lenders.

Stamping Charge: This is applicable on any legal document between borrower and the bank that needs to be signed on stamp paper. The charges will depend on the actual costs incurred.

Bottom-line

Please remember that all these charges may not apply to every borrower. So, before taking a loan it is important to find out what are the charges that one has to pay.

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