Types of Home Loan Charges

A home loan helps you to buy your dream house. You all must be knowing about the processing and stamp duty charges associated with a home loan. But there are other charges also that you should know. These charges will add more cost to your home loan. These charges vary according to the banks. Hence, even if one bank is offering a low-interest rate bearing loan, it doesn’t mean that the overall cost of the loan will be less because of the other charges that might be high.

Loan Processing Fee

This is a fee which is charged by the lender for your loan application process. Generally, the lender will charge a fee ranging from 0.5% to 1% of the loan amount. There are various formalities concerned while applying for the loan to the lenders like collecting the documents and verifying it. So this process requires due diligence hence a fee is charged which is known as processing fee. This fee is non-refundable.

Administrative fee

Every lender has an agency that audits the house that you are planning to purchase. Every technical and legal detail of the property is checked and verified. A report is made of the property and sent to the banker. This all is not done free of cost. The cost is charged to the lenders and few of the lenders pass the cost to the borrowers.

Prepayment Charges

Prepayment charges are the charges that you have to pay mandatorily if you choose to repay the loan amount before the tenure ends. Prepayment charges are not applied on a home loan having a floating interest rate but it is applied on a fixed interest rate. If your payment charges are more then you can avoid it and invest your money somewhere else. Why pay more when you can continue paying up to loan tenure and save the money.

Conversion fee

The conversion fee is a fee that can be beneficial or non-beneficial. A conversion fee is a fee that is charged to you if you wish to apply the changes on your own loan because of the changes that had happened on the interest rates because of the markets. Conversion fee depends on the difference between the old interest rate and the new interest rate. Generally, the larger the gap higher will be the conversion fee. If the conversion fee is high, you can simply switch to another lender.

Late Payment Penalty

If you do not pay Equated monthly instalments on time then you would be faced with late payment charges. These charges can be 2% high of the EMI. Hence, it is advised to pay EMIs on time so as to avoid late payment penalties. Furthermore, late payments will also affect your credit score and credit history, hence you must calculate EMIs in advance and plan accordingly.