Home Loan Processing Fee 2022: Fees & charges on housing loans
Home loans are a great facilitator that helps you cover a wide range of requirements, starting from building a house to buying a house. Being one of the best ways to look for, home loans also provide some additional benefits like the flexibility to choose our loan type, tenure of repayment, and other EMI options. However, with so many good things come a bit of fees, charges, and penalties. In every type of loan, there is a considerable amount of fees and charges that are applied to them.
Out of many charges that are applied on a housing loan, processing fees are the ones that account for a smaller fraction. This is charged by the lender one time for the entire loan period. Besides a processing charge, there are several other charges like prepayment charges, foreclosure charges, stamp duty charges, and various other types of penalties.
Let’s find out all the fees and charges that are associated with a home loan. This article will help you skim through home loans, and the processing fees and other charges involved with them.
What is a Home Loan and What Purpose Does it Solve?
As very much implied by the name itself, a home loan is a financial help that lets you buy or construct a house. Here, a lending institution goes through your documents and credentials carefully to know your repayment ability before sanctioning the loan. The lender, in return, charges a specific rate of interest on the loan amount which you have to repay within a tenure. You have the flexibility in choosing the housing loan type, the principal amount, and the tenure of repayment.
Home loans are sanctioned for a longer period of time as compared to other types of loans. The period for a housing loan often ranges between 20 years to 30 years. Monthly EMI is adjusted likewise to help the borrower pay off the instalments conveniently. In India, you can take a home loan for a variety of purposes like buying a house, renovating a house, or even constructing one. Housing loans are secured in nature which means the lender keeps the house until you completely repay the loan.
Now that you have known what a home loan is and what purpose it does solve, it’s time to know about the processing fee that comes with it.
What is the Home Loan Processing fee that Lenders Charge?
With many benefits that a home loan provides, it also comes with some extra charges and fees. Out of several charges that are applied to a home loan, processing fee is one of them.
A processing fee is one of the most important and clear charges that the borrower has to carry out one time for the entire loan period. This charge is paid to the banks and the NBFCs to help them deal with your housing loan application form. You have to pay the amount to the financing institution upfront rather than expecting it to be deducted from your loan amount. It is even called an administrative loan by some lending institutions.
This charge is only applied to you after your home loan application form is approved. The processing fees of most of the banks are about 1% to 2% of the total loan amount. However, it can go up to 6% in some banks.
Since it is also a service charge, you have to pay GST as well. The GST that is charged on the processing fees in India is 18%. However, not every lender charges you a processing fee to cut your extra expenses. Some lenders waive this fee as a special offer to attract more customers.
Besides that, these home loan charges are applied to different individuals based on their job profile and employment status. For instance, salaried persons are charged differently than self-employed professionals and self-employed non-professionals.
What are the Other Charges and fees that are applied to Home Loans?
Besides the processing fees, there are some other charges that are applied to home loans. Some of them are:
- Prepayment charges
These charges are also known as foreclosure charges for preclosure charges. You have to pay this charge only if you pay your loan amount before the tenure gets completed. The amount that is charged for prepaying your loan varies between 2% to 6% of the outstanding loan amount. However, some lenders do not charge any prepayment fees to borrowers for a floating rate of interest.
- Stamping charges:
If there is any legal document between you and your lender that has to be signed on the stamp paper for a home loan, then you have to pay the stamping fees. This charge doesn’t have a fixed number as it depends on the actual costs incurred.
- Legal fees:
As very much implied from the name, legal fees are charged to the borrowers for covering all the legal expenses that are associated with the creation of home loan agreements.
Besides these charges, there are several other charges that you have to pay during the entire process of home loan. They are income tax certificate charges, late payment fees, insurance, NOC or NDC charges, inspection fees, etc.
Summing it up
A borrower has to bear several charges ranging from loan-related charges to legal and document-related charges. However, as a borrower, you should be aware of all these charges before applying for a home loan. Without the proper knowledge, these home loan charges might cause you trouble related to expenses if you aren’t prepared beforehand.
You should talk to your financial advisor or a bank professional and do ample self-research before going for it. In case you want to know more about home loans, personal loans, car loans, education loans, etc. you should definitely look for it in Piramal Finance.