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All you need to know about the hidden charges for home loans

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Building your dream home is much more affordable and easily achievable with the financial institutions offering home loans with minimal documentation and lower home loan interest rates. But the fact that needs your attention is along with the EMI that you are paying, several hidden charges may be levied. This increases the loan amount and the cost of borrowing. Here is a list of 10 such hidden charges:

home loans

1. MOTD (Memorandum of Deposit of Title Deed) charges:

It states that you (the borrower) have deposited the title documents of the property to obtain the home loan. It requires a stamp duty that ranges from 0.1% to 0.2% of the final loan amount.

2. Documentation charges:

Some lenders charge a documentation fee to complete the documentation process, which has to be borne by the borrower.

3. Legal fees:

It is charged by the bank when lawyers are appointed to look after the legal aspects of the loan processing.

  1. Tenure change charges:

In case you want to extend or shorten the repayment tenure of your home loan, the bank charges a fee for the change of tenure.

4. Prepayment charges:

There are provisions for pre-closure of the home loans in most cases. But to do so, you need to pay a charge that is taken by the lender to make up for its income loss due to the prepayment or foreclosure.

5. Late payment charges:

If the monthly installments are paid late, the lender charges a late payment fee which is a percentage of the loan amount added with a fixed penalty rate.

6. Processing fee:

This fee is charged by the bank before the loan is sanctioned. It is an administrative cost that ensures that the loan process runs smoothly.

7. Administration charges:

This fee is charged after the loan is sanctioned and is a general fee to cover the per loan operational costs of the lender.

8. Inspection fee:

Before sanctioning the loan, banks will do a detailed inspection by hiring experts for which the borrower has to pay a fee.

9. Credit score report charges:

Approval of your home loan depends upon your credit score. If you need a copy of the same to be issued by the bank, they will charge you a fee.

Conclusion

Not all lenders charge all these charges. Even if they do, the amount and rates vary from lender to lender. We all compare the EMI through the home loan EMI calculator and the home loan interest rates online. But along with these, a look at and comparison of the ancillary charges associated with a home loan helps us keep our home loan cost of borrowing low.

Geneva A. Crawford
Twitter nerd. Coffee junkie. Prone to fits of apathy. Professional beer geek. Spent several years buying and selling magma in Miami, FL. Spent a year lecturing about psoriasis in Las Vegas, NV. Managed a small team writing about circus clowns in Las Vegas, NV. Garnered an industry award while writing about lint in the financial sector. Spoke at an international conference about getting my feet wet with dust in Libya. Spoke at an international conference about researching rocking horses in Bethesda, MD.