Before you avail a home loan, you must know about the product thoroughly. You must know your rights, duties and obligations as a home loan borrower. However, you must also know the precise amount you will need to pay while repaying the loan. As availing a home loan today is easy and hassle free, many borrowers ignore reading the fine print or inquiring about every aspect of the home loan from the lender. One such crucial aspect is home loan charges. Apart from the principal loan amount which you borrow, there are numerous other charges and costs that you should know about before applying. These charges can add to your total cost of borrowing and hamper your budget.
To help you gather adequate knowledge about your repayment amount, here are eight lesser-known home loan charges that you must know about.
- Processing fee
The home loan processing fee is the non-refundable fee that the lender charges from the borrower irrespective of whether their loan application is approved or not. The processing fee is usually 0.5% -2 % of the loan amount. You can negotiate the processing fee from the lender and also request them to waive it off.
Housing loan Interest rate is the amount the lenders charge you for lending money. The interest rate charged to you is determined by your eligibility and certain other factors. You can either opt for a fixed or floating rate of interest.
- Technical fee and inspection fee
When you submit your application, the lenders closely study the property and your application before approving it. Many lenders also hire an expert team to get your property evaluated and verified. The fee paid to experts is charged to you.
- Late payment fee
If you miss out on EMIs or repay the loan late, lenders charge a late payment fee, which can be a penalty based on the delay in the EMI amount.
- Foreclosure charges
When you choose to foreclose or prepay the loan, the lender charges foreclosure charges. This is to make up for the loss of revenue for the lender when you prepay the loan.
- Credit score checking charges
To determine your repayment capacity, lenders check your credit score and credit report from agencies and bureaus. The lender can charge you for the cost of procuring the credit report.
- Documentation charges
A lot of documents are prepared while approving a loan and disbursing amounts like loan offer, loan agreement, etc. The lender can charge you a fee for preparing documents and collecting the supporting documents.
- Refinancing charges
If you want to transfer your loan from one lender to another, you need to pay refinancing charges which are calculated as a percentage of the outstanding loan.
- MODT charges
While availing a home loan, you need to sign a memorandum of deposit of title deed, confirming that you have deposited the title deed willingly. You also need to pay stamp duty and registration fees while buying a house.
The aforementioned charges can add to your total cost of home loans and increase your debts. Therefore, you must have an understanding of these costs to be able to account for them while applying. Moreover, experts suggest reading the fine prints in the loan agreement carefully to unravel any hidden charges.