BUYING A HOME is one of the special times in our lives, and many people are looking to buy their home during the holiday season as this time is considered the most auspicious for any type of investment. However, while taking out a home loan, most people compare the prevailing interest rates and ignore other hidden fees that might apply to the loan.
You must remember that these fees can make a huge difference in your actual loan repayment obligation. Here we take a look at some of these fees:
Loan seekers generally know that banks charge processing fees when applying for a home loan. Processing fees may include costs related to KYC, loan eligibility checks, address and income verification, credit history check, etc., and vary from bank to bank . In most cases, the lender takes a certain percentage of the loan amount or a fixed amount, whichever is lower, as a processing fee. For example, SBI home loan has an application fee rate of 0.35% of the loan amount (plus applicable GST) subject to a minimum of Rs 2,000 and a maximum of Rs 10,000 ( plus applicable GST). However, as part of its Festive Bonanza, the bank has waived processing fees on home loans until January 31, 2023. Processing fees generally range from 0.20% to 2% of the loan amount, subject to of a lower and higher rate. limit, depending on the terms and conditions of the lender.
Prior to disbursement, the lender performs due diligence for legal appraisal and appraisal to estimate the value and suitability of the property before mortgaging it. Some banks may charge a separate fee for legal advice and property appraisal. Administration fees generally range from 0.2% to 0.5% of the property value.
Also Read: Got a Home Loan from HDFC? Three EMI payment methods you should know
Memorandum of Deed Filing (MODT) Fee
The MODT charge is levied to create a mortgage on the title deed of the property. The MODT indicates the lender’s share in your property until you repay the entire loan. These fees, which include stamp duty and registration fees, vary from state to state and range between 0.1% and 0.5% of the loan amount.
GST charge on home loan
You don’t have to pay GST directly on the loan amount, but GST applies to the fees you pay to the banks on the home loan. For example, if the processing fee is Rs 5,000, you have to pay 18% GST on it, or an additional Rs 900 to the bank. So, your total processing fee payable to the bank would be Rs 5900 including GST. Similarly, GST applies to administration fees, legal advice fees, etc.
Mortgage application fees
When you apply for a home loan, the bank must keep and manage several documents securely. Therefore, they charge a documentation fee to put your documents in a safe place and keep those documents in their file. Some banks include the documentation fee in the processing fee and do not show it as a separate overhead.
The list of fees is not yet complete, as the home loan may include additional fees, such as incidental fees, home insurance premiums, credit score access fees, pre-EMI fees, etc Costs vary from bank to bank. So, check with your lender before applying for a loan.
“When taking out a home loan, a borrower must consider not only the interest rates, but any other fees they might be required to pay to the financial institution they are borrowing money from. . These fees may vary from bank to bank. Banks give you details of these expenses,” says Adhil Shetty, CEO of Bankbazaar.com. “So you can estimate these fees, which can usually include processing fees, GST, legal fees, prepayment fees (if fixed interest rate), documentation and late penalties, among others. It is advisable to go through these fees before signing the dotted lines of the loan agreement.
If you are considering buying a property from a developer, you can check their list of links to lending institutions. Getting the loan facility from a bank linked to a developer can save you several fees as they usually come into the link after thorough assessments. Usually, legal advice fees, appraisal fees and processing fees are waived (depending on the arrangement between the developer and the lender). Before applying for a loan, you should check the additional fees in advance so that you do not get into financial trouble later.
LOOK BEYOND EMI
* It is not enough to compare the interest rate of the mortgage
* Processing fees typically range from 0.20% to 2% of the loan amount
* Some banks charge a fee for legal advice and property valuation
* The title deed memorandum fee is levied to create a mortgage on the title deed of the property