Here are 10 fees you need to pay
New Delhi, first published Nov 12, 2021, 13:40 IST
When you take out a home loan and make payments in equivalent monthly installments or EMI, you have to pay several charges. Fees vary among banks, real estate finance companies, and non-bank finance companies. Additionally, some lenders may charge separate fees or combine other fees. While some fees are a fixed amount, some fees are a percentage of the total home loan amount. Others are calculated as a percentage of the mortgage amount. It is essential to be aware of these fees, as these fees increase the cost of your mortgage.
Also known as an application fee, these are the initial fees that the lender collects for the scrutiny of the loan application. At this point, the lender analyzes whether the loan application contains accurate information as well as the relevant documents required for further processing.
During the credit underwriting process, a loan application is assessed on several parameters including KYC verification, financial evaluation, employment verification, home and office address verification, credit history assessment, etc. The lender recovers the costs associated with this mechanism through the processing fee. Some lenders charge a similar price as the processing fee, while others typically charge up to 2% of the loan amount.
Technical evaluation fees
Lenders hire technical experts to assess the physical health and market value of the property for which the home loan is taken out. These experts assess the property on a series of parameters which include construction specifications, legal approval, development approval, compliance with building standards, etc. They also determine the market value of the property by various means, including the cost of land and the cost of construction. While most lenders include these fees in their processing fees, some lenders charge them separately.
All lenders also check whether the property for which the borrower takes out the loan is not involved in a dispute before granting the loan. For this, they hire legal experts. These legal experts examine the relevant legal aspects like title deed, devaluation of property, certificate of no objection, certificate of occupancy, etc. After that, they give their final advice to the lender as to whether the loan should be issued against that property or not.
Postage is the process of having your mortgage contract stamped using a machine, thereby confirming that you have paid the required stamp duty. The franking of the mortgage contract is usually done by banks or authorized government agencies. These fees are only applicable in certain states like Maharashtra and Karnataka. Postage costs are typically 0.1 percent of the value of the home loan.
After the mortgage is disbursed, if the borrower is late in taking possession of the house, the lender charges simple interest called pre-EMI until the borrower takes possession of the property. EMI payment will start after that.
These fees will be collected by the lender on behalf of the government agencies in the process of availing the home loan. These costs mainly come in the form of stamp duty and the GST is collected by the lender and paid to the government.
The approval of a mortgage application has a limited period of validity. If your loan is approved, but it is not able to make the disbursements for a longer period, the lender will reassess your loan application. This period varies among lenders and can generally be up to six months. For example, HDFC charges a reassessment fee of Rs 2,000 in cases where the initial six month approval expires.
Many lenders require borrowers to purchase mortgage loan insurance against damage resulting from physical damage to property. Some lenders urge people who have taken out a loan to take advantage of debt protection life insurance policies so that their legal heirs do not have to worry about outstanding loans if something happens to the borrower. So suppose you decide to take out an insurance policy with a home loan. In this case, you will have to pay an insurance premium – this is often a single premium policy that lenders are often willing to finance.
If you are an NRI on a home loan, you may need to complete additional formalities. Your KYC documents and power of attorney should be notarized by Indian Embassy or local notary available overseas. You will have to pay the applicable fees.
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Last updated on November 12, 2021, 13:40 IST