You Should Definitely Be Aware About These Home Loan Fees & Charges!

For many, affording property purchases without the help of home loans is quite a challenge. Applying for home loans is quite common especially when these loans cover about 80% to 90% of the property cost. After getting the financial cover that is needed, a home loan can be repaid over a period of 20 years. This means that the loan can be comfortably paid back in monthly instalments. With this arrangement, you keep paying off the loan while earning an active income while the savings stay intact. 

Now, many people are unaware of the fact that a home loan’s monthly instalments are not the only expense that is costing them. A home loan can include other charges that you might be unaware of, such as the home loan processing fees, document charges, administration charges, late payment fees, and so on. These charges can add up to quite an amount, which is why it is so important to be aware of them. 

So, before you apply for home loan, read about these 5 home loan fees:

• Loan processing fee

The loan-processing fee is taken for processing an application for a home loan. This is usually non-refundable and is taken upfront irrespective of whether the application gets approved or rejected. This is why it is advisable to be thorough with the eligibility criteria and requirements of the lender before applying for a housing loan. Generally, the home loan fees for processing can range from 0.5% to 1% of the loan amount. 

• MODT fees

MODT (Memorandum of Deposit of Title Deed) is executed for a mortgage by submitting the title documents of the property with the lender. The government will levy stamp duty for registration costs, which varies as per each state. 

• Prepayment charges 

Pre-payment charges have been waived off for those who have a floating interest rate on their home loans. There are some banks that still charge a prepayment fee if the borrower uses funding from a third party and not from their savings. The penalty for prepayment is still applicable for those borrowers who have a fixed interest rate on their home loans taken under special schemes. 

• Legal charges

Before approving a home loan application, lenders have to check the borrower’s credibility. Their lawyers will verify the legal status of your property. The fees that the lawyers charge for this job will eventually be passed on to you. 

• Commitment charges

When a borrower does not take the loan within a specific period of time after it has been processed and sanctioned, the lender goes on to lose interest on the amount that is undisbursed. This is the reason why some lenders place a commitment fee for the delay to recover some of the interest they lose. 

Please note that not all lenders will necessarily apply these home loan charges. It is best to check with the lender beforehand and include all these expenses while calculating the total cost of taking a home loan.