What Are The Costs Involved In Taking A Home Loan?
Every single person thinks of building a house that he can call his “home.” This is why building a house is a major step in anyone’s life. And applying for a home loan is the first building block of this dream. However, before applying for a home loan, you should know all the basic and hidden charges on the person requesting a loan, which is conditioned by a bank.
What is an EMI?
EMI is an equated monthly installment that a person pays every month (to the bank) for the loan which he took (from the bank) for a particular monetary need. EMI can be for as small as a mobile device or as big as a house loan.
What is the maximum number of years a person can take a home loan for?
Many banks provide loans for homes for a duration between 5- 30 years. Just like home loan interest rates, this also varies from bank to bank.
What are the eligibility criteria for or being sanctioned?
Banks often sanction loans to people with a steady income. Multiple other factors are like age, loan amount and period, etc. are also considered.
Down Payment & EMI are a major part of the loan amount you would pay to the bank. But these are not the only charges which you would have to incur in the process.
Following is a list of charges which a bank would incur on you during the sanction process.
Banks charge a home loan processing fee of around 0.25 to 1 per cent of the total home loan amount you applied for. It’s also called a “loan origination fee” because this is the fee that must be paid at the beginning of the loan application procedure. This is mostly non-refundable. These are the fees that banks charge for their services like document verification etc. Similar to home loan interest rates, the processing fee is different for different banks.
For example: If you apply for a loan of 10 lakh rupees, you would have to pay up to around 2500 rupees(at 0.25%) to the bank as document verification charges. Suppose if by the end of the process the sanctioned amount is INR 9,00,000, the bank would return the due amount of processing fee. This is because the bank is authorized for charging a certain percentage as processing fees on the final sanctioned amount. So, in the above case, the bank would hand you over INR 250.
Note: Whether approved or not. This fee is compulsory.
Legal advisor verification fees
This is one of the very basic steps in the loan sanction process in which the bank hires an authorized lawyer to verify the credibility of your ownership of your property. The lawyer checks the documents related to past & present ownership of the property and makes a decision on which bank decides whether to approve your loan or not.
Just like the processing fee, this is also non-refundable and must be submitted with the application.
Stamp paper cost
This is one of the nominal fees which you would have to pay. It costs around INR 500 to buy stamp papers for the agreement documents of the home loan. This is the step only after the sanctioning of the loan by the bank. Bank will not provide the stamp paper, and you will have to shell out the money yourself.
Banks would charge an extra charge of 18% GST on every payment made by you.
Late payment fees
If you miss or delay the payment of your monthly EMI to the bank, the bank can charge you extra money in the form of late payment fees.
Note: The bank also charges you the interest of the amount which you missed.
The bank prefers to keep essential documents related to your loan sanction and agreement safe. They usually use national courier services for better efficiency & security. The bank will charge you all the costs regarding these documents transfers.
At the last leg of the sanctioning loan process, the ownership documents of your property must be deposited with the bank. Each state government charges a different fee on the stamp duty.
Technical inspection fees
Before sanctioning the loan, the bank ensures that the loan amount you requested does not exceed the bank’s estimated cost for that particular construction. For this, the bank charges a technical inspection fee for inspection of your property.
Above are the various charges which are usually incurred on a loan applicant during the sanctioning loan process. Just like every bank has a different home loan interest rate, many banks have most of these charges suited according to their needs. Do take note of the above charges and keep yourself in light of the loan policy of the bank where you are applying for the loan.