Home loan is the most popular among all loan products. Like all loan products, home loan also have some hidden and extra charge levied by the lender. These charges are generally paid by the loanee him/herself. Money9 gives you a list of top nine charges of home loan, which one should be aware of.
1. Application fee-Application fee is the first thing to take a home loan. Generally, application fees vary between Rs 500 and Rs 5,000 and it depends upon the lender.
2. Processing Fee-This is a mandatory fee but often waived off by some lenders to attract more customers. Generally processing fee depends upon the loan amount, subject to a minimum amount of Rs 3,000.
3. Administrative fee-Some lenders split the processing fee into two parts. The one charged after the loan is sanctioned is called administration fee. It varies between 1% and 2% of the loan amount.
4. Notary fee– If you are an NRI, then your KYC and the POA (power of attorney) need to be notarised by the Indian embassy or a local notary available abroad.
5. Pre EMI-charge-After loan disbursement if the borrower’s possession of the house is delayed, the lender charges a simple interest called pre-EMI.
6. Indemnity cost-The borrower needs to indemnify the lender for certain risks. For instance, the builder might face a delay in receiving an approval, or the property tax is yet to be paid fully by the seller, or some other reasons.
7. Documentation fee-For getting the loan agreement signed, getting the ECS mandate activated and a few other formalities, some lenders charge this fee. This fees generally varies from Rs 500 and Rs 3,000.
8. Insurance premium-Almost all lenders insure the home loan, as this is a long tenure loan. The customer has to pay the insurance premium fees. This premium fees generally vary from Rs 15,000 to Rs 30,000 and above.
9. Legal fee-Most lenders engage firms to scrutinise legal documents of the borrower. Generally, banks include this cost in the processing fee, but some PSU lenders also charge it separately from the customers.
Home loan is the most popular and most taken loan products. The market is highly competitive. Currently interest of home loan is coming down to 6.35% to lure more and more people, said a former AGM of a public sector bank.
“Home loan is the most popular products, but one should know all the charges that a loan has. Otherwise, the person would have unpleasant surprises while taking the loan,” said Nilotpal Banerjee, a personal finance professional from Kolkata.
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