Get Insights About Home Loan Hidden Charges & Fee

Last Updated : March 25, 2016, 9:43 a.m.

While applying for a home loan, we focus on the interest rate and loan amount that we can get. Even though we have an idea that there are going to be some upfront fees that you need to pay, we don’t know what all charges are going to be there. As a result, later when the lender asks us to pay that amount, we feel cheated or claim that there was no transparency in the process. So, to avoid such situations, when you apply for a home loan ,  make sure you check all the charges in advance. Also, you should know that some charges such as processing fee are non-negotiable but women borrowers get concession on stamp duty. So, here are some of the most claimed hidden charges on a home loan for you to consider and then proceed.

List of charges applicable on a home loan

Here are some important hidden charges and fees, which one should know in advance before applying for a home loan.

1. Conversion Fee: This is one of the most common charge and while availing the loan you hardly bother to ask. This is generally charged to reduce the rate of interest during loan tenure. For instance, if you have borrowed a loan at the rate of 13% and base rate of 10% + 3% mark up. After some time, the bank reduces the rate of interest and offers a lower rate of interest to new customers at the rate of 12.25%. To avail a loan on new rate of interest you need to ask your bank to change your interest rate. For this process bank will charge conversion fee. It varies from 0.5% to 1% of the total outstanding loan amount.
2. Memorandum of Deposit of Title Deed: This is an undertaking by the borrower that he has deposited the title documents of the property with the bank at his own wish and will, in order to secure the financing obtained from the bank. Government levy stamp duty on the documents to register the same. However, these charges vary from bank-to-bank.
3. Document retrieval charges: This charge is imposed at the time of closure/pre-closure of the loan. The process involves transfer of original documents from banks central document repository to the borrower. These documents include property’s original documents, Sale Deeds, Sale Agreement, NOC from bank and some other important documents.
4. Administrative charges: You should not mix the charge with processing fee. There are banks, which take administrative charges separately. It is charged for back-end processing of loan application.
5. Legal Fee: Some banks don’t have any in-house lawyer or any legal team, hence they hire an external lawyer to do the job. In such cases, bank charges legal fee from customers.
6. Inspection Fee: Bank conduct a physical inspection to the property before sanctioning the loan to evaluate the property. It is done with the objective that bank is not over evaluating the property and will sanction an amount based on standard market price.
7. Loan tenure changing charges: In case if you want to reduce or increase the total tenure of your EMIs in such case the banks might charge you a fee for changing your tenure.
8. Statement charges: Most of the banks provide a yearly statement for free, but in case you need a latest statement or you misplaced your statement. In such situation banks charge fee to issue new statement.
9. Pre-payment charges: Banks charge pre-payment charges in case you pre-pay your loan by borrowing the amount from some other bank. Although most of the banks don’t charge any pre-payment charges in case you are making the payments from your savings and there are banks, which don’t levy any pre-payment charges.
10. Late payment fee: Banks charge late payment fee in case you miss your due date. In such scenario bank charges a Standard Late Fee Charge +2% additional interest as per the due date. For instance: Late fee Rs. 350+ 10% interest+ 2% additional late fee charge.
11. List of Documents: In case if you ask for list of documents required by the bank for loan application, while responding your query the bank might charge you some document fee.

Thus, all these charges may make your home purchase even more expensive. But, there are some of the charges where you can negotiate so try to negotiate as much as you can.