When we take home loan, we always compare home loan interest rates from different banks. But what we forget to see are the extra charges that come with home loan.
A home loan has many other components and selection, loan should be taken only after active comparison of all such costs, which can dent you financially.
Here are some hidden charges to pay with home loan:
Processing fee: The processing fee is either a fixed amount not linked to the loan or it may be a percentage of the loan amount. The applicable processing fee varies from one bank to another, the charges usually range between 0.25 per cent and 1 per cent of the loan amount. Some banks put a cap on a maximum of Rs. 5,000 for processing fees, and it varies from branch to branch.
Memorandum of Deposit of Title deed (MODT Charges): MODT is a type of charge that are applicable for all home loan borrowers. In order to secure the financing obtained from the bank, Memorandum of Deposit of Title Deed is an undertaking by the borrower that he has deposited the title documents of the property with the bank at his own wish and will. The undertaking needs to be registered by a levies called stamp duty for registration charges. Stamp duty charges are 0.1% to 0.2%(on an average), which vary from one state to the other of home loan applied amount.
Conversion fee for home loan: If borrower wants to switch floating interest into fixed interest of his home loan, then the bank will charge a loan switching fee for such a request. This conversion fee charge is the most common among all Home Loan Hidden Charges. Most banks on an average charge 2 per cent of the outstanding loan amount to facilitate such a switching as requested, while charges vary from bank to bank.
Pre-payment Charges: Some banks charge pre-payment penalty if funding is not from own source, that is 3rd party funding including take over by other bank. If the borrower wants to prepay the loan, lenders do charge some penalty for home loans with fixed interest rates. Prepayment penalty still applicable for fixed home loans or loans availed under special schemes.
Legal fee: Banks have a team of legal and technical experts, or outsourced agents, who verify the submitted documents for each loan applicant. The fees of these experts or lawyers is being recovered from customers under the head Legal Fees. For some banks, the processing fee is inclusive of these charges while some others charge this separately.
Late Payment Charges: All banks charge late payment for every delayed EMI. Late payment charges can vary from Rs. 200 to Rs. 500(on an average) plus 2 per cent additional interest as penalty. So make sure borrower should follow the EMI due dates diligently.
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