Home Loan Processing Fees and Charges
The journey of owning a house is long. It begins with finalizing your dream home and the long EMI down payments. It is indeed a bittersweet achievement.
When you aim to buy a house and look for loan options, there are a few things to remember.
- You should have budgeted for EMI
- House interior costs
- All legal and processing costs
- Bank charges
- Any scope for late EMI payments and related charges etc.
Let’s understand these in detail.
Home Loan Charges
Home loan fees, also known as closing costs, are imposed by lenders and other parties associated with the home loan process for different reasons, such as loan initiation, appraisal, title pursuit and insurance, prepaid interest, loan discount points, PMI premiums, recording charges, and HOA fees.
These charges cover processing the loan, assuring property value, protecting against title difficulties, and providing other services. They can differ based on the lender, region, and kind of loan. Therefore, borrowers should thoroughly research and comprehend the costs of their loans and compare offers from other lenders to uncover the best conditions.
Before applying for a home loan, decide on the type you want. It depends on the type of property. Some loans include new or pre-owned home purchase loans (commonly availed by home buyers), renovation and repairs, and plot and construction loans.
So, depending on the loan, the home loan-related charges vary.
Home Loan Processing Fees
Almost all lenders charge processing fees. It is basically for processing your home loan.
This processing fee varies with financial institutions. Some charge this fee on a fixed term, while others charge it as a percentage of the loan amount, say 0.5% or 1%.
For instance, in the case of the SBI Home Loan, the processing fee (as per public information available online) is 0.4% of the loan amount. Similarly, for HDFC Home Loan, the processing fee is 0.5% of the loan amount, with a minimum amount of Rs 3,000 and a maximum of Rs 10,000.
Some lenders waive this fee on home loans (or any loans) during special occasions. For example, this usually happens during the festive season.
|
Banks |
Processing Fee (Min. in %) |
Processing Fee Amount (Min) |
|
0.5% |
Rs.3,000 |
|
|
0.4% |
Rs.10,000 |
|
|
1% |
Rs.10,000 |
|
|
- |
Rs.10,000 |
|
|
0.5% |
Rs.20,000 |
|
|
0.5% |
Rs.2,500 |
|
|
0.5% |
Rs.15,000 |
|
|
HSBC Home Loan |
1% |
Rs.10,000 |
|
0.35% |
Rs.2,500 |
Charges Standard for all Home Loans
The following are some of the standard charges applicable for Home Loans-
-
Down Payment for Home Loans
It is the first payment that comes from your pocket. When you apply for a home loan, you should know that the lender will not fund the entire property value. For example, say your property is worth Rs 80 lakh; you may receive around Rs 60 or 70 lakh as the loan amount. It is because of the LTV ratio (loan-to-value).
The RBI prescribes the LTV ratios, and all banks and NBFCs adhere to them. The same can be checked with banks/NBFCs. You can also check your home loan EMIs with the help of a home loan EMI calculator.
-
LTVs for Home Loans
- So, per RBI’s circular, the LTV for home loans up to Rs 30 lakh can be up to 90%. It implies you, as a borrower, will have to make 10% as a down payment for property valued up to Rs 30 lakh.
- Similarly, for home loans up to Rs 30 lakh and Rs 75 lakh, the LTV is up to 80%. It means your down payment will be 20%.
- And for loans over Rs 75 lakh, the LTV is 75%.
Remember that while RBI prescribes LTV limits, the eligible loan amount depends on other factors. These include income, credit score, job type, age, single/joint loan account, additional income, and other outstanding loans. It also impacts the down payment.
You may also want to know the Best Home Loan in India
Home Loan Fees for Documents
There are other charges to a home loan as well. These include administrative charges, legal fees, switching costs (when you transfer a loan to another lender), and late payment fees.
Most lenders provide a list of expenses to be borne by the borrower/homebuyer in the loan application. It is better to check with the lender and get the list of charges if it is unavailable.
However, some standard fees associated with home loans in India include the following:
-
Processing Fee
The bank or financial institution charges this fee once for processing the home loan application. It is usually calculated as a percentage of the loan amount, ranging from 0.25% to 1%.
-
Legal and Technical Verification Fee
This charge covers the expense of legal and technical property document verification. It varies according to the property's complexity and location.
-
Valuation Fee
This fee is levied for valuing the property to ascertain its market worth. It is often dependent on the property value and varies with each bank.
-
Document Verification Fee
This charge covers the expense of certifying the authenticity of the borrower's documentation, such as income, identity, and address proof.
-
Stamp Duty and Registration Charges
These are government fees placed on the registration of property papers that vary by state.
-
Prepayment Charge or Foreclosure Charge
If the borrower seeks to prepay or foreclose the home loan before the end of the loan term, some banks or financial institutions may levy a fee. The costs may differ based on the bank and the loan's remaining term.
Similarly, banks and other financial institutions also levy property inspection and annual service fees. While these charges must be paid upfront, they can be negotiated with the lenders. Further, you go through one of the loan agents. Then you may pay for them as well.
Conclusion
Before applying for a house loan in India, it is essential to thoroughly analyze the loan agreement and related expenses and clarify any issues with the bank or financial institution to guarantee a clear, explicit knowledge of the relevant fees.