Besides housing loan interest rate and processing charges, a home loan has several other charges/penalties/fees attached. Before you apply for a home loan, it is crucial to be aware of them to avoid confusion linked with terminologies and be thoroughly clear about what you are paying the lender for.
Mentioned here are some crucial home loan fees and charges:
Login charge, also known as application or processing fee, is a non-refundable amount levied by lenders when you apply for a home loan, even before your application is approved. This is a nonrefundable amount, meaning the charged amount is not refunded if your application is rejected.
Home loan processing fee is usually a fixed amount or percentage of a property’s cost. Thus, before you apply, ensure to check your home loan eligibility chances to avoid unnecessary payment of login fee for a loan you are ineligible for.
Prepayment fee, also called pre closure or prepayment charge, is a fee applicable if you repay your loan in totality before the repayment tenure ends. While lenders offering floating home loan interest rate are debarred from levying this charge by the Reserve Bank of India (RBI), fixed rate home loan usually has a prepayment fee attached to it.
Partial prepayment fee, also called part prepayment or part payment fee, is charged by lenders when you are paying a part of your loan balance. Again, in the case of floating home loan interest rate, no charges are levied. However, when it comes to a fixed rate home loan, you are likely to pay a partial prepayment charge on your home loan.
Late payment charge, or penal rate of interest, is levied if you miss out or delay your loan EMIs. The late penalty amount can either be a fixed amount or percentage of the installment due.
Conversion fee, also called switching fee, is applicable if you want to convert your fixed housing loan interest rate into floating or vice versa. So, if your lender’s rate falls, it will not be applicable until you pay the charge and make a switch or conversion in the case of a fixed rate home loan. You may consider switching from fixed to floating in case you are looking for transparency in rates as per market conditions.
Repayment mode swap fee is something that you must pay if you are looking to change your repayment dates or method. This may be usually Rs 500 each request.
Insurance premium is another cost that is incurred. While buying a home or life insurance is not mandatory if you avail a home loan, many lenders insist that you insure your property/home against physical damage. This is to assist the lenders cover up their losses, if any. Thus, do not forget to consider the premium cost also when computing your overall home loan cost.
Ending note
Other applicable standard charges include document retrieval charge, cheque bounce charge, loan cancellation fees etc. Note that delay in required home loan document submission may also invite a charge. Crucial documents required for home loan include identity proof, residence proof, bank account statement, personal assets or liabilities statement, property detail documents etc.
Ensure to carefully read the most important terms and conditions linked with a home loan. Such documents contain all types of fees applicable to your home loan. Once you are aware about all the rates and charges, ensure to use the home loan EMI calculator to fix your EMI as per your affordability and cash flow.
