Home Loan Rates 2018433 views
Last week, I met one of my college friend, he was really tensed. I asked for the reason and he told me that he has taken a home loan from a reputed bank and now thinking to pre-pay the loan amount to ease his burden. But, he was shocked to know that if he will pre-pay the loan before the tenure, the bank will charge additional 2-3% rate of interest on the remain balance as pre-payment penalty. He was not aware of the fact that the bank levied pre-payment charges for pre-closure of loan. This is a common scenario, while taking a loan you hardly bother to ask about these charges and in general most of us are not aware of these hidden charges and fees.
Even those who assume they know everything about the charges and other terms and condition, but at time even they are not aware of these hidden charges. To avoid such situation and stay informed this is really important that you should know about these charges in advance before applying for home loan. Most of us are more worried about how much amount will you get? What will be the rate of interest? What will be the monthly EMI? You work hard to improve your credit history to avail a loan. When you apply for a home loan most of the banks guide you about the application process, papers and documents required for application, expected sanctioned amount and monthly EMIs. But these banks don’t discuss anything about the hidden charges and fee unless you don’t ask. Here we are discussing some important hidden charges and fees, which one should know in advance before applying for a home loan.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.