For many, home loans are the only way to afford a house. Lenders provide housing loans that cover about 80-90% of the property value, and this makes it easier for a borrower to cover the expense of their property purchase. After taking the loan, lenders offer 20 years of tenure to repay it. This arrangement makes it possible for you to get the house you always dreamt of without having to deplete your savings in one go.
However, many people think that the only expense they come across is the interest added to the monthly instalments of the housing loan. This is not true as there are other charges involved when you apply for home loan. It is very important to count all these home loan charges and fees while calculating how much the loan is going to cost you.
So, take a look at the various charges a home loan plan in India might include:
- Documentation charges
In order to get the electronic clearing service (ECS) activated and all the documents signed, a lender can levy certain documentation charges. Apart from this, the original sale document has to be given to the lender once it is registered at the sub-registrar’s office. Lenders use trusted courier services for the transportation of the document to a central location. This is another charge that the lender can apply to their borrowers.
- Loan processing fees
This is one of the most common fees that housing loan plans include. Once the loan application is submitted, there are certain tasks to be completed by the lender before they sanction the loan. These include a review and verification of the documents attached with the application. To complete these processes, lenders can charge home loan processing fees. This one-time fee is charged based on the percentage of the loan amount you have applied for.
- Stamp duty charges
After the sale deed is registered with the sub-registrar, the original documents are placed with the lender as security until the home loan is repaid in full. To make this arrangement formal, a MODT (memorandum of deposit of title deed) is executed. As per state laws, registration charges and stamp duty are charged on this document.
- Administration charges
While some lenders only charge borrowers with processing fees on home loans, some financial institutions split this charge into processing fees and administrative fees. A processing fee is charged before sanctioning the loan and the administrative fee is charged once the loan is sanctioned.
Lenders offer various services while providing a home loan, which comes under the Goods and Services Tax (GST) section. While the loan amount is excluded from this tax, charges such as the technical and legal assessment fee, processing fee, administrative fee, and so on are charged with GST.
While a home loan might include these charges, it is not necessary that every lender will apply these. Make sure to inquire with the lender regarding their home loan fees before applying for the loan.