Your own house! This is a dream that most of us nurture from the time that we start earning. Buying your own house had become a bit difficult owning to skyrocketting property prices.
However, with the change in the global financial scenario, buying a house has become easier since banks are cutting interest rates and making it easier for people to buy houses.
Different banks are coming up with different schemes to home loan customers. You have different options to choose from and should use this option to find out about the best deals available for you. However, when you look at a home loan, it is important that you take into consideration not only the interest rates but also all the other charges applicable with the loan.
When you talk about other charges this could be paid both before the loan is disbursed to you, and possibly during the life of the home loan.
Some of these fees are listed below and these fees should be compared between banks to understand which home loan makes the smallest hole in your wallet.
Processing fee
Most lenders would take a cheque of the home loan processing fee along with the application form. This fee is mostly non-refundable. These charges could be anywhere between 0.5 per cent and 1 per cent of the loan amount.
Administrative fee
These charges are levied when the bank or financial institution offers you the loan disbursement letter. These charges vary from bank to bank. However, there are some banks which do not charge any administrative fees. This aspect is worth checking into.
Legal / Technical charges
Many lenders recover the costs that they incur for legal and technical verification of the property (valuation etc) from the customers.
These charges depend on the third parties hired to do such tasks and it is important for you to ask about these fees at the onset of the process itself to avoid any surprises.
Stamp duty
You will have to pay the stamp duty to the government on your home purchase transaction. These charges differ from state to state and depend on the amount you are taking as the loan.
Normally, the charges range anywhere between Rs 2,000 and Rs 4,000 for loans less that Rs 10 lakh (Rs 1 million) and for loans more than Rs 10 lakh, the stamp duty can range anywhere between Rs 7,000 and Rs 9,000.
However, with revised rates home loan seekers will have to pay 0.25 per cent more upfront for loans up to Rs 10 lakh and 0.50 per cent for loans over Rs 10 lakh. Many banks also recover the stamp duty paid on the registration of the loan agreement.
Prepayment / Foreclosure charges
Prepayment charge is the penalty paid by the borrower for making extra payments beyond the repayment schedule. Usually, this is waived off by most lenders.
Foreclosure charges are applicable when you repay the entire amount of the home loan before the actual tenure. Nowadays, banks levy this charge only when you are doing a home loan balance transfer to another home loan lender and not when foreclosing with your own funds.
However, the normal charges that you might need to pay can range between 0.5 per cent and 3 per cent depending on the banks.
Duplicate statement charges
Every year, the lender sends you a statement detailing the amount of money that you have paid during the year towards your home loan. This amount is broken into interest paid and principal repayments.
This is done for your annual tax filing purposes. If you lose this statement, the lender might charge you to issue a duplicate statement. Normally, these charges are between Rs 100 and Rs 500.
Delayed payment and cheque bounce charges
Delayed payment charges (late payment charges or penal charges) are levied if you make the payment after the due date. You might also be subject to cheque bounce charges in case one of your cheques is not cleared because of lack of funds.
Cheque bounce charges can range anywhere between Rs 250 and Rs 500.
Another problem that can crop up is your credit history being reported to CIBIL. This basically means that for the next seven years, whenever you approach a bank or a financial institution for another loan, your repayment record will come up for scrutiny.
Excessive cheque bounces can be basis for the rejection of your loan application.
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