When you are comparing lenders and checking out home loan options, you should not only look at interest rate comparisons, but also the various other fees and charges that is levied upon you. Some of these fees need to be paid upfront while you are taking the loan, while other charges are levied during the tenure of your loan. While negotiating with lenders you should have a clear idea about the various other charges so that you can negotiate well and get the maximum benefits. Here is a checklist on charges that will come in handy when you are shopping for a home loan:
- Processing fee: Almost all lenders levy a non-refundable processing fee on your home loan. This fee is usually in the range 0.25% to 1% of the total loan being sanctioned. Some lenders may cap the processing fees for a high ticket loan.
- Administrative fee: Some banks charge an administrative fee at the time of sanctioning your loan. This may vary from bank to bank. Some banks have even waived it off. It makes sense to consider such lenders who have done away with this fee.
- Legal charges: Lenders incur a legal cost when they evaluate or verify the property you are buying. Some banks have the policy of recovering these charges from the borrower. Ask about any such charge upfront while negotiating, so that you do not find your costs escalating later.
- Stamp Duty: You will need to pay a stamp duty to the Government during the transaction of your home purchase. Normally this stamp duty is 0.25 % for loans below Rs 10 lakhs, while for loans above Rs 10 lakhs the stamp duty may be 0.5 % of the total loan amount. You will need to make this payment during the registration process of your property.
- Prepayment penalty or foreclosure charges: When a borrower makes extra payments beyond the stipulated repayment (EMI) schedule, it is called a pre-payment. Most banks allow you to make a certain number of pre-payments in a year without any penalty. However, borrowers still have to bear a foreclosure charge if they repay the entire amount of loan before the completion of the loan tenure. This generally happens when a borrower opts for a balance transfer to another bank. This fee may range between 2% to 4 % of the total principal outstanding of the loan. If you negotiate, banks may waive this prepayment charges as RBI has mandated not to charge foreclosure charges for floating rate home loan.
- Duplicate statement: Each year your lender will send you a statement that gives the details about the amount of repayment you have made in the year broken down into principal and interest payments. You need this statement for filing your annual taxes. If you lose this statement the bank will charge you Rs. 100 – Rs. 500 for sending you a duplicate statement.
- Delayed payment: If you make some repayments beyond your stipulated date you will need to pay delayed or a late payment fine shall be a maximum of 24% per annum on the amount outstanding against your EMI amount.
- Cheque bounce charges: If you r cheque for repayment bounces because of the lack of fund in your account, you will have to pay a cheque bounce charge to your lender. These charges may be between Rs 250-500. As a borrower, you must bear in mind that repeated delayed payments will have a negative bearing on your CIBIL score.
- CERSAI Charges: The Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) is a company licensed under section 25 of the Companies Act, 1956 and registered by the Registrar of Companies, New Delhi. CERSAI was promoted by central government to prevent frauds involving multiple lending by different banks on the same immovable property. A bank or housing finance company may charge Rs 250 or Rs 500 (respectively for creation/modification of security interest)
While shopping for your home loan, you must clarify and negotiate on each of these charges with your lender, so that there are no nasty surprises later.