Expenses That are Not Funded by Home Loans

Last Updated : May 6, 2020, 6:20 p.m.

Looking to buy a home for the first time on a loan? You should be aware of how much home loan you can get from lenders. Home finance is generally restricted to 75%-90% of the cost of the property. This includes the cost of land too. But the rest 10%-25% is your obligation to fulfill. This is the downpayment you need to make to the seller. But that is not the only obligation for you. Yes, there are quite a few expenses for which you need to lighten your pocket. These include the processing fee, fees for legal and technical verification, registration charges, and MODT charges, etc. Lenders won’t finance all that. So, if you are planning to buy a home, ensure you have the capacity to pay for these expenses. Else you may have to ask your relatives or friends to provide you the requisite sum or your dream home could stay in your dreams only.

We at Wishfin, a neutral financial marketplace, can help you know each of these expenses that are not funded by home loans . This will help you figure out the sum and arrange it when the time comes to pay the same. Let’s begin reading about these expenses in this post.

Processing Fee

It is the fee that the lender charges to process your home loan application. The fee can be anywhere between 0.25%-1% of the loan amount. It may not seem big but can turn out significant in the case of home loans where the loan amount is usually higher because of the high property prices that prevail in the market. So, if you are applying for a loan of say INR 50 lakh and the processing fee on it is 0.75%, the fee amount could turn out to be INR 37,500. On this, 18% Goods and Services Tax (GST) will also apply. So, the eventual amount will be INR 44,250 (including the GST of INR 6,750).

Legal Fee

The property you wish to buy has to be legally certified by the competent lawyers appointed by the lender to carry out the process. Lawyers will come to check the property chain, which you can get from the seller of the property. The chain shows the transfer of property from one person to another as on date. To carry out this process, lenders will ask you to pay the legal fee, which will most likely be a flat sum.

Valuation Fee

Property valuation is one of the key elements involved in a home loan process. The surveyor officer comes to check whether the construction of the property is in line with the specifications of the map or not. Based on their findings, the valuation of the property is made. This ultimately decides the loan amount, so it’s a critical element of the home loan. The lender may ask you to pay a flat sum for the valuation.

MODT Charges

Memorandum of Deposit of Title Deed (MODT) is a mortgage that needs to be executed and deposited to the lender at your will. The government levies a stamp duty for the same and that can vary from one state to another. The stamp duty is based on the market value of the property. The rate of stamp duty can be 2%-7% across states. Concessions are granted if the property is registered under a female applicant. The registration charges account for 1% of the market value of the property.

Note – Some lenders may keep legal & valuation fees as part of their processing fee. In that case, you won’t need to pay for legal and valuation expenses separately.