Every loan transaction has various costs associated with it for the bank. There are administrative costs to handle your documents, recovery costs, and cost of handling risks associated with the lending amount etc. Also there are various bank departments and outsourcing parties involved to perform certain tasks.
Banks cover these costs from the borrowers in the form of various charges and fees. Hence it is necessary to know the costs involved in the home loan process in advance.
Following are the 20 home loan charges you should know along with their reasons to avoid further unpleasant surprises.
1. Processing Fees:
These are the fees to verify your documents and complete various loan-related formalities. It ranges between 0.25 to 1 percent of the total loan amount. Generally banks and NBFCs decide its amount on their own. The processing fees has to be paid along with the application and it is non refundable.
2. MODT Charges:
Memorandum of Deposit of Title Deed
At the time of loan application, you submit an undertaking that you are depositing the property title documents with the bank at your own free will in return for a loan. Government levy stamp duty on this document to register it. It ranges from 0.1 % to 0.2 % of the home loan amount.
3. Conversion Charges:
You may wish to reduce the interest rate by making the part payment if you have some cash in hand like bonus, savings etc. The charges you have to pay to reduce the interest rate during your home loan tenure are known as conversion charges. These charges varies from 0.5% to 1% of outstanding loan amount.
4. Document Retrieval Charges
Document Retrieval Charges are the charges levied at the time of loan closure or pre-closure. It is the cost of transferring original documents from Central Document Repository (CDR) to the borrower. CDR is the third party central storage where your documents are stored by the banks for security reasons. Often these charges are covered in the processing fees.
5. Administrative Charges
Some banks charge administrative charges separately apart from the processing fees. These are also charged at the time of loan sanction.
6. Legal Charges:
These are the charges to cover the cost of legal verification of your documents. In this case, banks need to take the help of the lawyers. These banks either hire a team of lawyers internally or outsource it.
7. Valuation Fees / Inspection Fees
These are the charges to perform a physical inspection of your property before sanctioning the loan. Banks need to ensure the actual value of the property. This is to prevent the over lending in case they need to auction the property.
8. Documentation Charges
These are the charges for various documentation process like Home Loan agreement, MODT, Indexing etc.
9. Switching Loan Package
These are the charges applied to change the loan scheme like floating rate of interest to fixed rate of interest or vise versa. Normally banks charge 1% of the outstanding loan amount.
10. Changing Loan Tenure
These are the charges applicable in case you need to change the loan tenure like reducing loan tenure by making part payment.
11. Statement of Account
These are the charges for additional statement of account. Some banks charges upto Rs. 500 for annual account statement.
12. Copy of Original Documents
These are the charges to receive your original documents from banks. Some banks charge upto Rs. 1000 to get the full copy of original documents.
13. Recovery Charges
In case of default, banks may charge you the recovery cost from you. It ranges from Rs. 250/- per default to percentage of the amount.
14. Pre-Payment Charges
You also have to pay the charges when you want to pay a lump-sum amount to get rid of the loan. This is due to the fact that, these banks are answerable to their investors to whom they have promised the amount from the interest you you every month. Pre-Payment charges are applicable for fixed rate home loans or loans availed under special schemes. These charges are to cover the cost banks will have to bear in case of the third party funding.
15. Late Payment Charges
These are the charges you have to pay in case of delayed payment.
Pro Tip: Never miss the EMI date. It not only costs you penalty but also affects your CIBIL score.
16. CIBIL Charges
CIBIL Report , as you may know, is the report card of your loan repayment history and a must have document for banks to process your loan. Some banks charge upto Rs 50 separately to generate your CIBIL report.
17. Cheque/ECS bounce charges.
These are the penalties applicable in case of cheque/ ECS bounce. Banks may charge upto Rs 500 for every cheque or ECS bounce.
18. Repayment Mode Swap Charges
These charges are applicable in case the applicant wants to change the loan repayment account, cheque/ECS details. Banks charge upto Rs. 500 for repayment mode swapping.
19. Duplicate No Objection Certificate / No Due Certificate
These are the charges to receive duplicate NOC or No due certificate. Some banks charge upto Rs. 100 for duplicate NOC / No due certificate.
20. Revalidation of No Objection Certificate
The NOC document needs to be revalidated before submission. The banks may charge upto Rs. 100 for the same.
Get the quick summery of the home loan charges as follows.
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