A home loan application is one of the most significant and biggest decisions you make in life. Though you might be excited about building a new house, buying an apartment or renovating, it is crucial to know all the charges associated with the home loan. So, give yourself some time in understanding terms related to the house loan, various charges the lender applies, eligibility criteria, and applicable interest rate.
Proper clarity on terms and charges help in making the right decision about loan amount, tenure, maintaining a healthy credit score, and the most important financial planning for paying EMIs for the next twenty to thirty years.
Loan distributors and banks include various charges with the home loan that might increase your monthly payback amount.
We will discuss crucial types of fees for home loans in the passage. Please read through and refer for your financial planning to apply for your dream home.
Types of Home Loan Charges
Loan Processing Fees
Financial institutions charge processing fees at the time of home loan application. This is a fee for accepting your documents and application at the lender’s website or office. The processing fee is a non-refundable charge even if the home loan is not sanctioned.
Lenders use this amount for the formalities related to the home loan application. The fee varies from lender to lender.
Table for the current processing fees by leading financial institutions of India in September 2021
|Lender’s Name||Processing Fees (percentage of the total home loan amount)|
|Axis Bank||Up to one per cent. Maximum amount should not exceed 25 thousand INR|
|Bank of Baroda||0.25 to 5 per cent (amount should be between Rs. 8500 to Rs. 25000)|
|Bank of India||0.25 per cent (Minimum amount Rs. 1500 and Maximum amount Rs. 20000)|
|Canara Bank||0.50 per cent (minimum Rs. 1,500 and maximum Rs. 10,000)|
|Indian Bank||0.40 per cent, maximum amount limit at Rs. 20,000|
|HDFC Ltd.||For self-employed professional and salaried home loan applicants either up to 0.50 per cent or Rs. 3,000 plus taxes, whichever is higher
Self-employed non-professional either 1.50 per cent or Rs. 4,500 plus taxes, whichever is higher
|ICICI Bank||0.50 per cent with taxes|
|IOB||0.5 per cent, maximum amount Rs. 25,000|
|PNB||Complete waiver till 30th September, 2021. Post that 0.35 per cent of the loan amount (minimum Rs. 2,500 and maximum Rs. 15,000)|
|SBI||0.40 per cent plus GST (minimum amount Rs. 10,000 and maximum Rs. 30,000 plus GST)|
|South Indian Bank||0.50 per cent (minimum Rs. 5,000 and maximum Rs. 10,000)|
|UCO Bank||0.50 per cent (minimum Rs. 1,500 and maximum Rs. 15,000)|
|Kotak Mahindra Bank||0.25 to 1 per cent plus GST|
|Union bank||0.50 per cent (maximum amount Rs. 15, 000 plus applicable taxes)|
|Central Bank||0.50 per cent (maximum amount Rs. 20,000)|
A few loan distributors and banks charge administrative fees on your home loan. This is also non-refundable and utilises for legal and technical verification of the property and details furnished by the borrower.
Generally, financial institutions outsource the verification work to a third-party agency. The agency evaluates and submits the final report to the lender. Your lender decides about your
eligibility, loan amount, and EMIs based on the report.
The administrative fee is one-time, non-refundable ranges between Rs. 2,500 to Rs. 6,500.
Conversion fees come into play when the borrower wants to change the interest rate on the house loan. You can apply for change when interest rates fall to reduce your monthly payback amount in terms of EMIs.
The amount of the conversion fee depends upon the difference between the existing interest rate and the new interest rate. If the difference is more, you will end up paying more conversion charges and vice-versa.
Note: If you consider changing the lender itself for the advantage of a lower interest rate, you might have to pay more because the new lender will charge processing fees and administrative fees, which will increase the cost of applying afresh.
Current status on conversion charges
Banks charge around 0.50 per cent of the outstanding loan amount plus applicable taxes. In addition, switching to MCLR one-time option with banks that is not available with NBFCs and Housing Finance Companies.
Penalties for Delayed Payments
As the name suggests, you need to pay penalties for delayed EMIs. The charges are pretty high to encourage borrowers to pay back loan amounts on the scheduled EMI dates and never skip or delay.
It is advisable not to delay the EMIs because you might have to pay a hefty amount of up to 2 per cent of the EMI along with already payable loan money.
Prepayment charges are applicable when borrowers ask lenders for the closure of the home loan before the tenure ends. Recently, the Government of India abolished prepayment fees on house loans with floating interest rates.
Banks and financial institutions can charge you for closing the loan account before tenure if you have opted fixed interest rate.
The borrower must calculate the amount of money outstanding and how much they are paying as charges before making the final decision of closing the loan.
Prepayment or Foreclosure Charges an on 1st October 2021
|Lender’s Name||Pre-payment Charges|
|PNB Housing Finance Limited||Nil for Individual Borrowers
2 per cent of the prepaid principal for non-individual borrowers
|DHFL||Nil for Individual Borrowers
3 per cent of the prepaid principal for non-individual borrowers
|LIC Housing Finance Limited||Nil to 2 per cent of the prepaid principal amount|
|Federal Bank||Nil to 3 per cent of the prepaid principal amount|
|Yes Bank||4 per cent of the outstanding principal|
|Reliance Home Finance Limited||2 to 5 per cent of the outstanding loan amount|
|Tata Capital||Nil when paid off using borrower’s own fund|
Leading banks and financial institutions including SBI, ICICI Bank, Kotak Mahindra, Axis Bank, HDFC Ltd, Indiabulls do not charge foreclosure fees.
Know your home loan requirements and plan your financial commitments wisely. Refer to the passage for the right idea about charges comes along house loan application.